Loan Limits - Movin' On Up!

Welcome to the New Year!  For the first time in over a decade, Fannie Mae is increasing its loan limits for conventional loans.  It is nothing drastic, but certainly a move in the right direction.  For quite some time, the maximum loan amount for a conventional loan in the Nashville MSA has been $417,000 – anything over that amount went into the “jumbo” category.  The new number for Fannie is now $424,100.  But maybe what is the better news from Fannie is that they moved their loan limit for their expanded program (High Balance Agency product) up to $466,900.  The expanded program has a slight rate bump (typically .125% for 30 year fixed with no more than .25%), but also allows up to 95% loan to value.  So in essence, someone could put 5% down on a home priced at $491,450 with only a slight bump to the rate.  Remember that jumbo loans require 20% down and typically have a rate bump of .25-.375% above the Fannie rates.  So this is a nice option.

Also, and probably even better news than the Fannie loan limit increase, is that FHA is also increasing their loan limits.  The new limit for the Nashville MSA (which now includes Maury County) is $466,900.  So with a 3.5% down payment, someone could buy a property at $484,000 and still do a maximum FHA loan.  This becomes an even bigger benefit for a buyer with a sub-720 credit score (and dramatically for a sub-700 score).  So keep that in mind when you have a client with minimal down payment but who qualifies for close to $500,000 in price.  These options could come in handy – and we always have the combo option available (where we keep the first mortgage at the Fannie limit and do a second mortgage up to 90% so that a buyer can buy a more expensive home and only put 10% down (versus taking a jumbo loan and putting 20% down).  You are welcome to call me if further explanation is needed.

Lastly, I want to touch on rates very quickly.  Hopefully the jump in rates post-election wasn’t a shock to anyone – we’ve been discussing it for several months.  The 30 year conventional fixed rate jumped about .75% in the 2 weeks after the election.  The big question now is whether or not we are done with the rate jumps.  My personal opinion, and this is based solely on instinct and how the charts read from a technical standpoint, is that we will see rates hanging between 4% - 5% throughout 2017.  I think we’ll push 5% by summer and then drop back down into the mid 4’s by year end.  But I definitely believe that the sub 4% rates on conventional loans are likely a thing of the past.  Not to worry – sub 5% rates should not slow down our market at all.  It will be another very good year for real estate in Middle Tennessee!