How Your Clients Can Benefit From 2020 Home Loan Limit Increases

I’m already excited about our prospects for the New Year. The FHFA, FHA, and VA have all increased their 2020 home loan limits and economists are predicting that the interest rate for a 30-year fixed-rate mortgage will remain stable and below 4% in 2020. These two factors should provide more opportunities for first-time homebuyers to enter the market, and for families to afford to move up to a larger home. Let’s take a look at the new FHFA, FHA, and VA loan limits for 2020 to see how they can benefits your clients.

Conventional Home Loans

Conventional conforming home loans are the most popular type of loan program across the nation. Fannie Mae and Freddie Mac loans from the Federal Housing Finance Agency (FHFA) only require homebuyers to put down a minimum 3.5% down payment to qualify. In 2020, homebuyers can borrow up to $510,400 in 2020 (for a one-unit property) and up to $765,600 (for a one-unit property) in high-cost areas, including Alaska, Hawaii, Guam, & U.S. Virgin Islands. Click here to view the loan limits for your market.

This loan limit increase will enable more home buyers to purchase at a lower rate instead of requiring a jumbo loan, which usually has a high interest rate, credit score, and down payment requirement.

FHA Home Loans

Homebuyers who want a low down payment requirement, use gift funds and/or have concerns about their credit score could qualify for an FHA home loan. Backed by the Federal Housing Administration, the FHA guidelines are generally not as strict as government-sponsored enterprises like Fannie Mae and Freddie Mac.

As of January 1, 2020, the FHA’s standard limit for most of the country increased to $331,760 for a one-unit property. Homebuyers in high-cost areas, including Alaska, Hawaii, Guam & U.S. Virgin Islands have been assigned FHA loan limits of up to $765,600 for a one-unit property. The revised high-cost loan limit is based on the Housing and Economic Recovery Act of 2008 (HERA) requirement for the FHA to assign a loan limit to these areas equal to 150% of the national conforming limit. To search for your county’s 2020 loan limit, click here.

VA Home Loans

VA home loans enable eligible veterans, active duty, National Guard, reserves, and surviving spouses and their families, the opportunity to purchase and home with zero down payment and seller-paid closing costs, making the total out-of-pocket money required to purchase a home, in some instances, zero.

The interest rates on VA home loans are typically lower than conventional and FHA home loans, and no mortgage insurance is required, which makes homeownership affordable for those who have served our nation.

The VA loan limits are the same as the FHFA’s home loan limits, so the standard maximum VA loan limits for one-unit properties is $510,400 in 2020 and as high as $765,600 for one-unit properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Additionally, Purple Heart recipients are no longer required to pay a VA Funding Fee.

When showing your clients potential home to purchase, remember that these new home loan limits also apply to renovation loan products, so your homebuyers could purchase and renovate an older home or fixer-upper.

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