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Conventional loan limits increase for a third year in a row

By Jeff Lazerson

11/29/18

What I think: It’s a trifecta for Southern California mortgage shoppers as the Federal Housing Finance Agency, or FHFA (Fannie and Freddie’s conservator and regulator), boosted local conforming and so-called agency high-balance or super-conforming loan limits three years in a row.

For 2019, all Southern California counties get to enjoy a 6.9 percent conforming loan limit increase from $453,100 to $484,350. Conforming loan limits generally run at one-eighth to one-quarter point lower in interest rates compared with high-balance rates.

Orange and Los Angeles counties are just two of 11 California counties that received the green light on the maximum high-balance increase, going from $679,650 to $726,525.

San Diego county’s high-balance went from $649,750 to $690,000.

There is no high balance lending in Riverside and San Bernardino counties.

Conforming loan limits vary depending on how many units there are on a property. Two-unit limits are $620,200, three-unit limits are $749,650 and four-unit limits are $931,600.

For high-balance loans in Orange and Los Angeles counties, two-unit limits go to $930,300, three-unit limits go to $1,124,475 and four-unit limits go to $1,397,400.

For high-balance loans in San Diego county, two-unit limits go to $883,300, three-unit limits go to $1,067,750, and four-unit limits go to $1,326,950.

Maximum conforming loan limits set a record.

Pursuant to the American Recovery and Reinvestment Act of 2009, Orange and Los Angeles counties previously enjoyed higher-balance loan limits at $729,750.

Veterans Affairs loan guarantees are statutorily linked to the Freddie Mac loan limits according to Susan Carter, VA’s media relations director. In other words, zero down VA loans will match the new limits.

Carter points out that VA does not set a maximum loan amount. If you go over the maximum conventional loan limits for a conforming or high-balance VA purchase or refinance loan, you have to put some money down.

The formula is 25 percent of the difference between the loan limit and the sales price. For example, let’s say you buy a $1 million Orange County home with VA financing. You would have to put $68,369 down (which is 25 percent of $273,475, the difference between the new maximum loan limit and the $1 million sales price).

The Federal Housing Administration will make its announcement on loan limits in early December, according Brian Sullivan, FHA spokesman.

Most conventional lenders are likely to use these new loan limits immediately. When it comes to VA and FHA (assuming FHA raises), it’s likely that you will have to wait until Jan. 1 for your lender to order your VA or FHA case number. Don’t assume. Confirm with your lender ahead of time about this.

Conventional rates are usually lower, easier to qualify for, allow for lower down payments and allow lower credit scores than, say, a jumbo loan (anything over $726,525).