Pg 26 • JANUARY 2020 • UPBEAT TIMES, INC. The Mortgage Coach
New Conforming Limits! by Barry O'Meara of Santa Rosa, CA • firstname.lastname@example.org
resolutions. The rains have arrived, and the trees and vineyards have bared their vines and branches. With New Year’s resolu- tions in hand, and 2020 in sight, it’s time to reach for your goals. Winter is one of the slower
time of the business cycle. It is also the time of year that the lending guidelines are set, defining what a conforming loan should be. Fannie Mae sets loan limits each year, and our thriving economy is once again giving rise to higher limits.
On the lending front, there are new conforming
he New Year has ar- rived, and it is time to keep those
loan limits. Fannie Mae an- nounced new higher National Conforming loan limits. Sonoma County is consid- ered a high cost area and eligible for High Balance loan limits. The High Balance limit for 2020 is $704,950. A home- buyer can purchase
a home with a loan amount up to $704,950 with just a 5% down payment. Now a home with a purchase price of $742,052 can be bought with just 5% down. The National Conforming
limit is now $510,400 up from $484,350. In this price range you can buy a home with as little as 3% down payment. So, a household purchasing a primary residence can get into a $526,185 home with just 3% down.
Fannie Mae was created dur-
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ing the Great Depression in 1938, adding liquidity to the banks and freeing up funds to help homeowners and build- ers grow the economy. This created Mortgage Back Se- curities (MBS) that would be sold on the secondary market, expanding access to funds that could not be achieved us- ing local Savings and Loans; much like the classic movie “It’s a Wonderful Life”. Fannie Mae went public in
1968, and two years later Fred- die Mac was created. These two mortgage giants estab- lished the basic guidelines for what we consider Conforming Loans. Part of this conform- ing platform was to establish loan size limit. Since 1980, when the Conforming limit was $93,750, the loan limit has consistently gone up. In 2006, $417,000 was set as the maximum loan limit, and it stayed that amount till 2016. Conforming loans can be un- derwritten with fewer over- lays, and are more stream- lined than jumbo loans. Any
Pg 26 • JANUARY 2020 • UPBEAT TIMES, INC.
loan amount over the national conforming limit of $510,400 or in high cost areas, or “High Balance Limit,” are consid- ered Jumbo loans. In Sonoma County, the “High Balance Limit” was left unchanged at $704,950. Jumbo loans are underwritten with more stringent guidelines, such as a minimum down payment of 10%, and maximum debt-to- income (DTI) ratios of 43%. Under conforming guidelines, you can get an approval with a DTI of up to 50%. This will add needed financing to the higher priced homes. This helps the move-up buyer and creates more opportunity for first-time home buyers. This has a rippling effect that cas- cades through the economy, as one escrow closes and an- other one opens. For those not familiar with
loan sizes and what they mean, conforming loans are underwritten through an Au- tomated Underwriting System (AUS). Basically, this is a program that crunches num- bers and determines if you are a good credit risk. Fannie Mae uses Desktop Under- writer (DU) and Freddie Mac uses Loan Prospector (LP). Both analyze your credit score, loan-to-value, property type and loan purpose. If you meet the guidelines set by ei- ther of these loan programs, your loan will be approved. The essential point is: Less overlays, and quicker approv- als. High Balance Loans that conform to AUS are extended to the higher loan amount. So, if your goals for 2020
include purchasing a home, it’s time to set your sights on navigating toward the future. Know before you owe, and find out how much you qualify for. Sometimes it takes a vil- lage to buy a home, so co-bor- rowers or tenants-in-common could be a solution to making a home affordable.
There is no remedy for love but to love more. ~ Henry David Thoreau B. O’Meara
UPBEAT's Yearbook 2020 CELEBRATING OUR OUTSTANDING CONTRIBUTORS
Upbeat Times in Las Vegas, NV!
Upbeat Times at the Hoover Dam between NV & AZ!
Upbeat Times in Manhatten, NY!
John Follansbee of Forest- ville, CA, having a great time at the Hoover Dam!
~ Ken Fuhr of Santa Rosa, CA. in Manhatten, New York!
Upbeat Times in Sonoma County, California!
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