Guest post from Matt Hodges with Compass Home Loans:
Every year in mid-late November, conforming loan limits are set for the next year. This year, our government gave us a bit of a surprise on the Freddie/Fannie limits and a very nice surprise on the FHA limits. Unless you’ve been living under a rock, you know that the mortgage world and the real estate markets have been tumultuous this year. There is little investor confidence is any mortgage product not named Freddie, Fannie or Ginnie. Hence, the government has meddled into the market. Perhaps you could say nationalized the market.
Back to our November surprise. The national loan limits for Freddie and Fannie remain at $417,000, but because we are in a “high cost” area, our limits have been expanded to $437,000. It’s a nice surprise because that loan limit should correspond to the real estate marketplace. Yet, for the past three years, the limit has remained the same, despite dropping house values nationwide. Now, the very good news is that FHA has raised their limits to $417,000 nationwide and $437,000 locally (Charlottesville, Albemarle, Greene, Fluvanna, Nelson (excel file).
By the way, buy in Louisa (pdf), and your loan limit is $535,900 -they are part of Richmond’s MSA.
Waynesboro and the rest of the Valley remains at $417,000 for Fannie/Freddie and range between $271,050 and $277,150 for FHA.
Previously, the FHA limit was $323,000, but in March FHA was allowed to raise the limit to $425,000. This increased limit came with a cost of about .5 point higher in rate, so many borrowers declined this route. Now, with all three entities operating on the same page, borrowers will have clear choices and that better reflect costs of housing in our area.
Further, often clients are choosing FHA over conventional loans, even when they have upwards of 10% down payment. Given the restricted ability to acquire home equity lines and loans, mortgage insurance premiums can be significantly higher for conventional over FHA, with no discernable difference in interest rate.
Ed note: I have two additional guest posts tentatively lined up for the coming weeks. One on short sales in the Charlottesville/Albemarle area and one that sheds light on the local builders’ point of view.