Just in time for Thanksgiving last week, the Federal Housing Finance Agency (FHFA) gave home buyers another thing to be thankful. On November 24, the FHFA announced new 2021 Fannie Mae and Freddie Mac loan limits for both conforming and high-balance loans. This is particularly important in California where home prices exceed the national average. Most home purchases in Los Angeles and the surrounding areas - unless the buyer has a significant down payment – fall into the non-conforming, or “jumbo” loan category. The new limits give many buyers the opportunity to qualify for a conforming loan, which is easier to qualify for; can have a lower mortgage interest rate, may offer a lower down payment; and can allow some wiggle room with your credit score. What is a Confirming Loan? Conforming loans are mortgages that conform to financing limits set by the FHFA and meet underwriting guidelines set by Fannie Mae and Freddie Mac, whereas nonconforming loans do not. Conforming and nonconforming loans are both types of conventional loans. Fannie Mae and Freddie Mac are the government-sponsored entities that buy conforming loans. These behind-the-scenes companies provide a secondary market for mortgages, allowing lenders to package loans into investment bundles and sell them so they're able to lend again. The limit for a conforming loan in LA county is $548,250. The new maximum limits for high-balance loans in greater Los Angeles and immediate surrounding areas are:
Los Angeles County: $822,375
Orange County: $822,375
Ventura County: $739,450
In Los Angeles county, this means that you could purchase a $1,027,968 with a 20% payment and not have to apply for a jumbo loan. What is a Nonconforming Loan? Loans above the conforming loan limit are known as “jumbo” loans. The terms and conditions of these nonconforming mortgages can vary widely from lender to lender, but the interest rates for jumbo loans are typically higher because they carry greater risk for a lender. Nonconforming loans often mean a minimum down payment of 20% or more; stricter credit-qualifying criteria, with more scrutiny of your credit profile and income; a higher mortgage interest rate.
Comments