FHFA Increases Loan Limits for 2017

Last week, the Federal Housing Finance Agency (FHFA) announced loan limits would increase for the first time since 2006. For over 10 years, the maximum loan limit for single family homes has been $417,000 in most counties across the country. In 2017, the loan limit will rise to $424,100, an increase of 1.7%. Why did the loan limit increase and what does it mean?

Every year, the FHFA announces the maximum loan limit for the year ahead. Loan limits set a cap on the size of mortgages that can be guaranteed by Fannie Mae or Freddie Mac. As long as your loan amount falls below the maximum limit, you are eligible to finance your home with a conforming loan (if the loan amount is above the limit, it is considered a Jumbo loan). Conforming loans are considered industry standard, with easier terms and generally lower interest rates, appealing to many borrowers.

Loan limits are determined by the Housing and Economic Recovery Act of 2008 (HERA), which was enacted to help the housing market recover after the crisis in 2008. The act dictates that loan limits will only adjust once home value prices are equal or greater than what they were in 2007. This past year, average home prices met and even surpassed the 2007 level. During the third quarter of 2016, the average price was roughly 1.7% above where it was in the third quarter of 2007. This is how FHFA decided to raise the loan limit 1.7%, up to $424,100.

Loan limits will be even higher if you reside in a county FHFA designates as a “high-cost area”; where the local median home value exceeds the baseline loan limit. For example, Maryland’s Montgomery County will have an increased loan limit of $636,150 compared to $517,500 in Baltimore City, and $424,100 in Wicomico. The limit also corresponds to the type of home you purchase. If you are in the market for a two-unit, three-unit or four-unit, the loan limit rises accordingly. See a full list of the maximum loan limits here.

Overall, this increase is a good sign. It means the housing market is starting to recover and our economic outlook for 2017 is relatively positive. As a home buyer, it will allow you to consider homes that are priced slightly higher, expanding your options and purchase power.

How the Election Affects the Housing Market

After Hillary Clinton’s defeat became evident, and Donald Trump became our president-elect, markets started going a bit haywire. Overnight trading in stock market futures, which provides a speculative and hedging market for what the stock market will open at the next day, started sinking precipitously. However, by morning, everyone had changed their tune and the stock market opened nominally down, finishing the day strongly up and near new all time highs.

Meanwhile, something we have not seen in a while started to happen: interest rates started rising with tremendous velocity. The U.S. 10 Year Treasury is yielding 2.1% from 1.8% days earlier. Interest rates are set by a market of buyers and sellers, and no one always knows what drives their decisions. It is difficult to read the tea leaves of why China is buying or selling our government debt, but those rates effect your mortgage rate. It is also one of the largest reasons the US homeowner is capable of borrowing at such low rates! We have the entire world looking to put dollars into mortgages.

But what does this all mean for the future? Today, it’s difficult to paint an accurate picture. If inflation (the rate goods and materials go up in price) remains somewhat low, which still seems likely, rising interest rates reflect a new optimism in the American economy. For the mortgage business, refinances might decrease, and financing rates may go up, but if the economy is doing better, the housing market will be right there with it.

Company News: First Home’s New Look

After more than 25 years in the mortgage industry, First Home Mortgage has decided to update our brand. We are very excited to release our new look across all channels and throughout all of our branches. First Home has embraced the statement “We Put People First” speaking to the reason behind our business – prioritizing the customers, partners and employees who encompass First Home Mortgage Corporation.

As a company, First Home is consistently trying to improve the mortgage experience for clients and colleagues. Our new image reflects our efforts to modernize while still staying true to our fundamental business practices: home financing on a personal level. Whether you are buying a home or looking to refinance, First Home will continue to serve borrowers with the efficiency and professionalism which have built our success.

Through this rebranding strategy we are hoping to improve our platform, which includes a more optimized website that is easier to access and navigate. As we continue to move in this new direction, our hope is to steadily reveal more resources that will heighten our customer service level.

Feel free to contact us and continue following our blog so that you can discover our new initiatives.

 

How Credit Scores Affect Mortgage Rates

Obtaining a low mortgage interest rate can help you save money on the price of your home. While many people try to compare lenders to secure the best possible rate, one of the main determinants of a mortgage rate is your credit score. Borrowers with higher scores are more likely to receive a lower rate than those with lower credit scores. Most lenders view a potential home buyer with a high credit score as more dependable and less likely to default on mortgage payments.

What is considered a “high” score?

The highest score a person can have is 850. However, it’s unusual for someone to have a perfect credit score. Most home buyers should aim for a score of 720 and above to qualify for good mortgage rate. If your credit score goes below 620 it can be difficult, though possible, to get a mortgage as well as a favorable rate. For an approximate breakdown, here is a range of how credit scores are judged:

Excellent = 720 and above
Good = 660 –719
Fair = 620 – 659
Poor = 619 and below

Can I still obtain a loan with a low credit score?

If you know your credit score isn’t stellar, it doesn’t necessarily mean you cannot qualify for a mortgage. For example, an FHA loan is a popular loan type among first-time homebuyers which accepts less than excellent credit scores. When you begin the mortgage process, your Loan Officer will order a credit report and you can start to explore your options in more detail.

Finding your credit score

A credit report can come from three different reporting bureaus: Equifax, Experian, and TransUnion. These reports require some background information and security questions, then deliver an outline of your credit history. However, if you’re interested in simply retrieving the number, you can easily view your FICO credit score, through your credit card company or online. It’s important check your credit score in order to determine whether you should improve it before applying for a loan. Speak with your Loan Officer about when you’re looking to buy and what you can do to in the meantime to increase your credit score.

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