Loan Limits, Affordability and Turkey

November is an interesting month in the mortgage industry. Lenders are grappling with two federal holidays, which impact productivity and eligible business days for government disclosure calculations. But, more compelling, November is the month we typically receive the Federal Housing Finance Agency’s announcement of any change to the conforming loan limit.

This limit is the maximum first mortgage amount that conforms to the guidelines of Fannie Mae and Freddie Mac, which represents most of the mortgage market.

While all interest rates have improved this year, the lowest rates are the conforming variety. But many homeowners and homebuyers cannot avail themselves of these low rates because home prices have risen an average of 12% from a year ago, according to the National Association of Realtors. Higher home prices mean homebuyers need more expensive jumbo loan options. An increase to the conforming loan limit will go a long way to re-affect affordability.

Do we know what the new loan limit will be? Not yet, but we have our suspicions. Loan limits are based upon certain home price data, published quarterly. The next and most pivotal publication is November 24th. Prior publications allow for some extrapolation and put the new loan limit somewhere in the bell curve between $545,000 to $555,000, a significant step up from last year’s announcement of $510,400.

Speaking of last year, the 2019 announcement of the 2020 conforming loan limit dropped on November 26th. So, we should be able to enjoy some fresh loan limit data with our turkey and dressing next week.

For homebuyers, homeowners, realtors and lenders, expect an improvement to affordability and a Happy Thanksgiving.