Posted January 23, 2014Tweet
For the ninth consecutive year, 2014 conforming loan limits remain at their prior-year levels, a move which helps U.S. homeowners and buyers get access to inexpensive, government-backed home loans and today's low mortgage rates.
The loan limits are effective as of January 1, 2014 and apply to conventional mortgages nationwide.
Loan limits are appropriately named. They are the maximum allowable loan size for a mortgage. Loan limits vary by product and region, and are included in a program's specific mortgage guidelines.
For example, the Federal Housing Administration enforces specific loan limits for FHA loans; and the Department of Veterans Affairs maintains specific loan limits for VA loans. Loans which exceed an FHA loan's local loan limit cannot be insured and loans exceeding a VA loans local limit cannot be guaranteed.
For conforming loans -- loans backed by Fannie Mae or Freddie Mac -- loan limits have been unchanged since 2006 when the government moved to raise the national limit to $417,000.
Conforming loans which exceed a local loan limit are commonly known as "jumbo loans". Jumbo loans are typically not backed by Fannie Mae or Freddie Mac, and are offered by local and national banks.
Jumbo mortgage rates are sometimes higher and sometimes lower as compared to conforming ones. However, because jumbo loans are not government-backed, eligibility requirements are often more stringent.
There aren't many low-downpayment options in the jumbo mortgage market; and, income and credit score requirements are often higher for jumbo loans. This is why the decision to leave the 2014 conforming loan limits unchanged is an important one.
With conforming loan limits held at $417,000 for at least another year, homeowners using conventional programs to refinance -- such as HARP -- and buyers using Fannie Mae's 5% downpayment program to purchase can get access to the lowest mortgage rates possible at the largest loan size available.
Fannie Mae and Freddie Mac made no change to the conforming loan limits for 2014.
In 2006, conforming loan limits were raised to $417,000. Loan limits were then held at that loan size between 2007-2013 despite rapidly falling home values nationwide.
At the time, officials defended the move by citing their want to make mortgage credit available to home buyers during a crucial stage of the housing market's recovery.
Reinforcing this point, in 2009, conforming loan limits were raised in certain "high-cost" areas nationwide; areas in which the median home sale price handily exceeded the national average.
The government has designated more than 208 high-cost areas nationwide including New York City, New York; Los Angeles, California; and the entire San Francisco-San Jose-Oakland metropolitan region.
No U.S. counties will experience a decline in conforming loan limits for 2014.
Several counties will benefit from an increase including five counties in Massachusetts, three counties in New York, and two counties in Virginia. Cities with new, elevated conforming loan limits for 2014 include Boston, Newburgh and Poughkeepsie, and Culpeper County, Virginia.
Garfield County, Colorado also received an increase, moving all the way to $625,500.
The baseline, non-high-cost conforming loan limits for 2014 are :
High-cost conforming loan limits range up to $625,000 for a one-unit home; $800,775 for a two-unit home; $967,950 for a three-unit; and $1,202,925 for a four-unit. In Hawaii, loan limits are even higher.
Not everyone's mortgage will fit within the 2014 conforming loan limits.
The good news is that homeowners and home buyers whose loan size exceeds conforming loan limits can still get financed. There are several home loan options. One such option is to get an FHA-backed loan.
FHA loans are loans insured by the Federal Housing Administration and loan limits for FHA loans can be higher than for a comparable conventional loan. In high-cost areas, the FHA will insure a loan up to $625,500.
FHA loans allow for low downpayments of just 3.5 percent and the agency is often more flexible with its loan approvals than either Fannie Mae or Freddie Mac.
Via its FHA Back to Work program, for example, the FHA will allow loans for a home buyer who is just 12 months removed from a bankruptcy, foreclosure or short sale. You can't do that with a conventional loan.
Borrowers over the conforming loan limit can use VA loans, too.
VA loans are loans guaranteed by the Department of Veterans Affairs. Like FHA loans, VA loans can be made at larger sizes than conforming ones. However, VA loans are available to military borrowers only.
Among the remaining ways to get financed are USDA loans for homes in non-urban city centers; and jumbo and private loans made by local and retail banks. You can get mortgage rates for jumbo loans here.
Conforming loan limits are unchanged for 2014, marking the ninth straight year of the $417,000 loan size cap. However, limits will vary by state and county -- sometimes by a lot.
Find your 2014 local conforming loan limit and get today's live mortgage rates for your area. Mortgage rates can vary by loan size.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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