If you’ve been researching the real estate market or house hunting, you’ve probably come across the term “loan limits.”
What is a loan limit?
When you apply for a mortgage, there is technically a limit to the amount you can borrow. A lot of this is based on the buyer’s credit score and how much they can afford for a monthly payment. However, loan limits are also determined at an industry level by the Federal Housing Finance Agency (FHFA) – these are referred to as conforming loan limits. Conforming loan limits help regulate the loans Freddi Mac and Fannie Mae can purchase.
How does this affect me as a buyer?
The good news is that loan limits are staying in line with inflation, so they are increasing for 2023. This means buyers have a higher limit for borrowing. The new baseline for a conforming loan limit in January 2023 is $726,200. For perspective, it increased from $647,200 in 2022. This does fluctuate depending on where you live (e.g., Alaska or Hawaii).
Why should you be aware of loan limits? If you plan to buy a house with a loan that exceeds the conforming loan limit, you may have to apply for a jumbo loan – this is also known as a non-conforming loan. This isn’t a negative, but be aware a non-conforming loan coincides with a higher monthly mortgage payment. If you know this before securing your loan, there is nothing to worry about.
Should you make loan limits a priority? Sure, it’s never a bad idea to be aware of the market. Still, they have the most effect on buyers who plan to purchase a home at a higher cost.
If you still have questions about loan limits, mortgages, or the current state of the real estate market, don’t hesitate to reach out. I’m happy to help! Interested in buying or selling a home in 2023? Give me a call at 717-253-3259 (cellphone) or check out my website at www.karentavenner.com. I’m here to answer all questions and make the process smooth for everyone involved.
Happy New Year!