2024 Conventional Loan Limits Explained, A Good Omen for the Economy

https://www.youtube.com/watch?v=JVDlVf2X5MI&t=5s

1. Introduction
   • Purpose: Discuss conforming loan limits for 2024 and their relevance to buyers.
   • Presenter: Licensed lender in 48 states, emphasizing the importance of understanding loan amount changes.
2. Understanding Conforming Loans
   • Definition: Conventional conforming loans (e.g., 3% down, 5% down) are standard loans like 30-year or 15-year fixed, backed by Fannie Mae and Freddie Mac.
   • Significance: Over 70% of U.S. mortgages are conventional conforming loans.
3. Importance of Loan Limits
   • Role: Determines the type of loan (conventional vs. jumbo) and affects down payment, rate, and overall loan type.
   • Scenario: If the loan amount exceeds the conventional limit, it becomes a jumbo loan.
4. Loan Limit Determination
   • Authority: Set by the Federal Housing Finance Agency (FHFA).
   • Process: Annual review based on third-quarter results using a complex formula to assess housing price trends.
   • Impact: Indicates market trends. A raised limit suggests market growth, while a constant limit might indicate a market downturn.
5. 2024 Loan Limits
   • New Base Limit: $766,500 for conventional loans in most areas.
   • High-Cost Areas: Higher limits in specific regions, e.g., Alaska, Hawaii, Bay Area. Maximum for one unit is $1,149,825.
   • Jumbo Loans: Any amount above the specified limits.
6. Identifying Your Loan Limit
   • Resources: Links provided for checking specific county limits.
   • Timing: 2024 limits applicable even at the end of 2023.
7. First-Time Homebuyer Programs
   • Down Payment: Minimum 5% down for loans above the base limit ($766,550) in high-cost areas.
   • Restrictions: 3% down programs only applicable if the loan amount is under $766,550.
8. Shopping for Homes
   • Advice: Check loan limits in multiple counties if shopping near the $766,550 threshold.
   • Reminder: Loan limits vary significantly in different areas.
9. Area-Specific Considerations
   • Example: Different limits in high-cost areas can impact loan options (conventional vs. FHA).
   • Advice: Work with lenders knowledgeable about these variances.
10. Key Takeaways for Buyers
    • Market Indicators: Rising limits suggest increasing prices.
    • Opportunities: Higher limits can benefit buyers in certain regions.
    • Importance: Choosing the right lender who understands loan limit implications.
11. Conclusion
    • Additional Information: A link provided for detailed explanations.
    • Assistance: Availability of licensed loan officers (Alyssa and Sandy) for consultation and pre-approval processes.
12. Call to Action
    • Encouragement to reach out for further clarification or to begin the pre-approval process.

Welcome back! Today we're going to be talking about conforming loan limits for 2024. First of all, why should you even care? What does it mean, what are they, and what do you need to know as a buyer to make sure that you're properly educated, empowered, and informed, so that you can buy a house without having any issues?

Okay, so if you're unfamiliar with the channel, I am a lender licensed in 48 states, so loan amounts changing is very, very important to me, and we're going to talk about why.

So first of all, what is a conforming loan? What does that even mean, right? So, if you're looking at getting, you know, a 3% down, 5% down conventional conforming – that's how lenders call them – it's your most vanilla loan there is, right? A 30-year fixed, a 15-year fixed, you know, that is going to be your traditional conventional conforming loan. And those are backed by Fannie Mae and Freddie Mac, that's the ultimate end buyer of those loans, and it accounts for over 70% of the mortgages that are closed in the United States, last time I looked.

So, the loan limits are important because the bottom line is this: if you're trying to buy a house and you're like, "Oh, I want to do 5% down," but the loan limit for conventional is lower than your loan amount that you're going to have, you'd be doing a jumbo loan. It's a different loan. Okay?

The loan limits are important because it tells us, the lender, what loan you can do, and it also affects how much you put down, what type of rate you get, as well as what type of loan overall you're doing.

So, here's the first thing you need to know: the conforming loan limit is determined by FHFA, the Federal Housing Finance Agency. And every single year, they look at the results from the third quarter, and they do this incredibly complicated mathematical formula to determine if housing prices are going up or not, and how much they're going up, so that they can put together what they think the national loan limit base should be. But, there are some adjustments beyond that.

Now, for everyone who's been saying the housing market's crashing or has crashed, if they did not raise the limit, that would be a sign that those people are correct. Okay? That's the deal. If housing prices are going down, they cannot raise the limit. They can never decrease it, but they cannot raise it. So, I want to be really clear about that because I know there's so much talk about a housing market crash and everything else, but guys, there are some key indicators, and the key indicator the housing market is crashing is if they don't raise the loan limit. They did, okay? So, they raised it approximately $40,000. The new loan limit, and I have to look at it – it's never a straight number; it's always ridiculous – the new loan limit base in America for a conventional loan is $766,500.

Now, prior to this, it was 720 something – I know, right? I said that because it's a ridiculous number, once again. So, now it's $766,500. There are areas of the country considered high-cost where they will have a higher loan limit for a conventional loan above that $766,500. Alaska and Hawaii are in that automatically. Other areas that likely are in that high-cost limit, Bay Area in California, you know, it's a lot of the usual suspects. That loan limit, and I'm talking about one unit right now, guys – so, multi-units is a different story – so, one unit, you're buying a single-family house, you're buying a condo, you're buying a townhouse, okay? The ceiling right now is $1,149,825.

Got it? Got it. So, anything above that in those areas would be considered jumbo. Now, you're like, "Uh, how do I know?" That's a good question, guys. I'm going to have a link, um, in the comments and in the description – I need to stop playing with that pen – that will show you guys. You click on it, you put in your county, and it will show you what the loan limit for 2024 is.

Now, the nice thing about conventional conforming loans is that we can start using that loan limit for '24 even at the end of 2023. Okay? So that's great.

Now, something important to note is that if you're doing a first-time homebuyer program, and maybe you're in San Francisco where they have that high-cost loan limit that is higher than the $766,550, right? You're going to have to put 5% down at a minimum, owner-occupied. That's the one thing a lot of people get stuck on, or they don't quite understand, is that if you're doing a first-time homebuyer program, if you're doing an owner-occupied loan at 3%, it has to the loan amount has to be under the base loan limit, which is the $766,550.

Okay, so your lender will know this, guys, but just so that you know as well because sometimes I'll hear, "Oh, well, I looked up my county limit, and it's a million dollars, so I can do 3% down, right?" Not with conventional. No, no. That 3% down program is only going to be if your loan amount is underneath that new $766,550.

So, a couple of things I would suggest, um, first of all, if you guys are shopping, and you're shopping towards the tip of that, I would definitely, like, if you're like, "You know, I'm at $800, but I'm in a higher-cost county, and I looked it up, and the limit's $900, so I should be fine," you need to look at the counties around that because we will see pretty dramatic differences just 10 miles away.

Okay, so if you're looking in multiple counties, make sure you're looking at all the loan limits, if your loan's going to be over the $766,550. If you're looking at a $400,000 house, don't worry about this, guys. $600,000 house, don't worry about it. $766,550 loan amount, don't worry about it. It's just when you go a dollar above that, that we've got to look to see if you're in a county that has a higher loan limit or not.

So, it's really important that you guys are aware that there are parts of the country where you can go higher with a conventional loan and it's not considered jumbo. If I look at America as a whole, there's not a ton of areas like this, you know, there's parts of New York, parts of New Jersey, parts of California, but the bulk of the United States is going to be falling underneath the $766,550.

Okay, so that's important for you guys to know. Um, so yeah, the only problem I could see with this is if someone's in one of those higher-cost areas and they're trying to do a 3% down program, and they or their lender do not recognize that you can't do that over the base amount of the $766,550.

Um, the other thing, and I'm talking about the FHA limits on Thursday, is that sometimes, you know, the conventional loan limit will be higher than FHA, and in a situation like that, if you switch from conventional to FHA, you may not be able to buy the house because the loan limit won't work. The reverse is true as well, you know, if I look at Alaska and Hawaii, the FHA loan limit there is like over $1.7 million, no joke, whereas with conventional, it's $1.1.

So, this is a lot of information, and you guys are like, "Jennifer, this is a lot of information." It is, and this is why you want to make sure you are working with a lender that understands the differences of the loan limits, how they work, which programs work with each one. You know, look, since you can only do 3% up to the $766,550 – I need to get a tattoo, I'm not getting a tattoo, but I'll write it on my hand or something – you know, if you're looking at one of those higher-cost areas, let's just use somewhere in San Francisco, you know, you're going to be doing 5% with conventional if you push over that, whereas with FHA, you wouldn't. So, that could be a good option.

But the key for you guys to know is there's a lot of videos talking about loan limits going up, there's a lot of news about it, but as a buyer, as a consumer, what do you need to know? Well, here's the news: prices are going up. That's why the loan limits are going up in FHA and conventional. You know, if you're pushing those limits, this can be a great opportunity for you because, for instance, there's parts of Texas where it would have been a jumbo loan, and now it's not. Okay?

But the key is going to be, make sure you guys are working with a lender that understands the variances of all these loan limits, how it impacts you, and how to help you have a loan that's structured for your benefit.

So, pretty quick video because there's not a lot to it. I am actually going to have a link that explains it, it has the calculation of how they come up with this number. So, I'll have a link if you guys want to dig into that, and it does talk about, you know, um, why they will never decrease the amount. And one interesting tidbit that I want to leave with: they actually didn't change the conforming loan limit in America from 2007 to 2017. And the reason they didn't change it is because since they can never decrease it, right, they have to make up for if the market's going down.

So, in this case, it's nothing to worry about because based on the numbers, the market is still increasing, um, but if there ever comes a day, it is an interesting thing to know, just as like an indicator, you know? It's one of those cool things you can say at a party if people are talking about a potential housing crash, and like, you have information they don't, which is, "Hey, they raised the loan limits, which means X, Y, and Z."

So, as always, guys, thanks for watching. If you need to get pre-approved, if you want to talk about this, get on the calendar, my calendar's open, it's free. You would talk to Alyssa and Sandy, who are both licensed loan officers, who can answer all of your questions. We do that every day, so please, please, please, reach out. Thanks for watching.