You’ve been searching and searching, you’ve saved your money for a sizable down payment, and now you’re not finding what you want because prices keep going up! Your choice is to either increase the budget or decrease the list of wants and needs. You decide to increase the budget, but then find out you’re in “Jumbo” territory- the rate is higher, the criteria for qualifying has changed- now what?
Most buyers are at the mercy of what Fannie Mae and Freddie Mac set as guidelines and limits.
Each year Fannie Mae/Freddie Mac review the conforming guidelines for loans they are able to purchase. Last year we saw an increase in the loan limit from $510,400 to $548,250- an increase of 7.4% as the market increased by double digits in AZ. Now, well into 2021 we have seen appreciation in some neighborhoods of 20%+ which makes it more and more difficult for buyers to find what they are looking for under the conforming loan limit.
The BIG news and expectation of Fannie/Freddie is they will increase conforming limits to $625,000; an increase of 14% over 2021. This typically happens in November of each year- so we are right around the corner from new loan limits, which increases buying power and helps keep pace with the market.
What if you’re shopping or under contract now? We spoke with some of our close lending partners and have found, buyers can in fact start shopping with the new conforming limit in mind, the lender will apply for an exemption through a, “change of criteria,” order with their underwriter and get you approved before the new limit is announced! Of course, this is IF you’re working with a lender that will push this exemption through.
Consider if you’re shopping right now, you have 20% down and are maxing out the loan limit. That puts your budget at just under $700,000- a very healthy budget, however, you can shop around and see there aren’t many homes to choose from nor do they have the updates and yard you are looking for. With the new loan limit, you can increase your budget to $780,000 and still be under the Jumbo loan criteria, still qualify for an amazing rate and only increase your monthly payment by approx. $200.*
Another consideration is to put less than 20% down, if rates are still historically low, you can have a larger loan and still keep your payments down. You will need to discuss all your options with your lender and find the right payment, rate, and loan for you.
Armed with approx. $80,000 more in spending power, you can increase your search parameters and see if that perfect home is out there. Happy shopping!
Want to discuss your budget and what this means for you?
Contact us today!