The Change That Could Help You Score a Bigger Mortgage in 2017

The Federal Housing Finance Agency recently announced that loan limits for 2017 are going up. In many parts of the country, loan amount sizes are rising. In particular, the conforming loan limit has risen from $417,000 to $424,100. (Conforming loans, which are not to be confused with conventional loans, are mortgage loans that adhere to guidelines set by Freddie Mac and Fannie Mae.)

While these mortgage loans’ rise may not seem significant, they’re particularly important because loans that exceed $424,100 are considered to be conforming high balance loans, which means higher pricing and higher fees, as they’re greater than the conforming loan limit. This change by the Federal Housing Finance Agency also means that the maximum county conforming loan limits will be increased, making it easier to get a bigger mortgage or to buy a house with less than 20% down, for example.

Here’s an illustration: Looking at Sonoma County, the old maximum county loan limit was $554,300. In 2017, that number will change to $595,700. This represents an additional $41,400 that does not need to be brought to the table anymore. That money can be financed instead. Essentially, the loan limit increase allows you to borrow more money and still stay within conforming loan limits. The reason this is important is because when the loan exceeds the maximum county limit, it automatically enters a more restrictive lending landscape. Such requirements for homeowners include lower debt-to-income ratios, a stellar credit history and a more solid financial picture. (Not sure where your finances stand? You can view two of your free credit scores, updated every 14 days, by visiting Credit.com.)

These loan limits allow more people to borrow more money without having to put more money down in their transaction. Homeowners can refinance bigger loan sizes and still stay within the conforming loan limits. The change will also help homeowners who were just a hair over $417,000 stay within conforming limits. And it comes at a critical time when mortgage rates have etched up in recent weeks, with the 30-year fixed rate mortgage now hovering just over 4.0%.

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