Christmas came early for house-hunters in Box Elder, Davis, Morgan and Weber counties when two federal agencies announced homebuyers in these areas will have greater access to mortgage loans.
The first announcement came from the Federal Housing Finance Agency, which said it will raise the conforming loan limit 6.9 percent in 2019 from $453,100 to $484,350.
This applies to all counties in Utah except Salt Lake, Summit and Tooele, which the government considers high-cost areas. Salt Lake and Tooele counties will have a limit of $600,300, and Summit will max out at $726,525. The new limits go into effect Jan. 1, 2019.
This is an important change because conforming loans can be one of the most affordable mortgage types. Local lenders originate the loans and often sell them to Fannie Mae and Freddie Mac, government-sponsored enterprises that purchase mortgages.
Buyers who need home financing above the limit often use private financing through a jumbo loan, which can be more expensive.
“These limits are important for funding home sales in high-cost coastal markets like California, Virginia and Maryland, but are increasingly important in other markets … like Nashville and Denver, along with those in Utah and Wyoming,” said a press release from the National Association of Realtors regarding the FHFA announcement.
When home prices rise significantly, it becomes increasingly difficult for buyers to stay below the conforming loan limit, especially in high-cost areas or places where values have risen quickly. Over the past year, home prices in Box Elder, Davis and Weber counties have increased 12 percent while they gone up 11 percent in Morgan County — all significant gains.
Because the conforming loan limits define the maximum that Fannie Mae and Freddie Mac may finance, it’s important those amounts reflect this recent upward movement in home prices.
“Today’s decision reflects rising or near record high home prices in many U.S. markets, and the move helps keep the American Dream within reach for countless families working with Fannie Mae and Freddie Mac,” said John Smaby, president of the National Association of Realtors. “Without this assurance that loan limits keep up with home price growth, borrowers across the country risk being pushed out of the market altogether as mortgage rates and rising home prices continue to hold back potential homebuyers.”
The higher loan limits are also helpful to buyers with less-than-perfect credit who may have difficulty qualifying for financing outside of government mortgage programs.
“The market for private financing has improved, but remains hobbled since the Great Recession, requiring more onerous standards of would-be homebuyers who do not possess pristine credit and/or face higher rates than those charged by the Enterprises,” said the National Association of Realtors press release. Fannie Mae and Freddie Mac are often referred to as the Enterprises.
The good news isn’t limited to conforming loans. Mortgages insured by the Federal Housing Administration will also have higher limits in 2019. In Box Elder, Davis, Morgan and Weber counties, FHA loan limits will increase from $389,850 to $401,350. Other FHA limits throughout Utah will range from $314,827 to $726,525, depending on the county.
Again, this is a positive development because it will provide loan access to buyers with small down payments and less-than-perfect credit. For more information about the loan changes and finding a home in your price range, talk to a Northern Wasatch Realtor. Find one at NWAOR.com.
Brenda Nelson
President
Northern Wasatch Association of Realtors