For the first time since 2006, the Federal Housing Finance Agency (FHFA) has increased the conventional conforming maximum loan limit for 2017 by $7,100 up from its current $417,000 to $424,100.
Another bit of good news is that the high-balance loan limit also goes up by $10,650, from its current $625,500 to $636,150.
But what does this mean for borrowers???
Loan limits play a vital role in the home mortgage process, especially because it will impact a borrower’s down payment funds. For example, the borrower wants to purchase a home that is $500k, under the previous loan limit, the borrower would need to put down $83k and the $417k max loan would cover the difference.
With the 2017 loan limit increase, for the same scenario above, now the borrower puts down only $75,900 with the $424,100 loan so that $7,100 difference can stay in the borrower’s pocket rather than tied up in the down payment.
The same is true for the high-balance loan limit increase for high-cost areas such as the Bay Area. So when every little bit counts, that $7,100 or $10,650 increase can sometimes make the difference between being able to buy now or waiting another few months to save up for the shortage in down payment or closing cost funds.