Real estate agents have positive news to bring potentially skittish buyers in the new year. A recent Zillow report suggests that changes made by the Federal Housing Finance Agency (FHFA) could mean that millions of homes are now more accessible financially for consumers.
An analysis by Zillow Home Loans released Wednesday indicates that more than 2 million homes across the country no longer require a jumbo loan, thanks primarily to a recent increase of conforming loan limits that the FHFA implemented late last year in some high-cost areas.
The FHFA increased the limits on the home price that qualifies for a conforming loan to $1,089,300.
Conforming loans are the largest amount a mortgage company can lend to a borrower and still sell the loans conventionally to Fannie Mae and Freddie Mac.
Unlike conforming loans, jumbo loans are considered less affordable for buyers because they often come with additional fees and more stringent qualification standards—many lenders require a minimum credit score of 700 versus 620 for conforming loans.
Jumbo loans often require 20% down, although some call for even higher down payments.
In light of the recent changes, Zillow offered some advice for buyers as they shop around for a mortgage to set themselves up to qualify for the best mortgage rate:
- Research and learn about your credit profile.
- Improve your credit score by paying down debts, paying bills on time and reviewing your credit report.
- Avoid closing accounts to remove them from your report. They aren’t automatically removed and will continue appearing on your report.
- Hold off on large purchases that need to be financed.
- Determine what affordability looks like.
Key highlights:
- The baseline conforming loan limit in high-cost areas (103 counties) has topped $1 million for the first time.
- 163 counties have a higher loan limit than the national baseline.
- The conforming loan requirement increased by $79,000 to $726,200 in 2023.
The takeaway:
“The addition of 2 million homes that now qualify for conforming loan options across the country is welcome news for homebuyers entering a shopping season with fewer homes on the market,” said Nicole Bachaud, Zillow Home Loans senior economist. “Home price appreciation has slowed significantly, and this means that homes nearing jumbo loan territory will stay eligible for conforming loans longer than we have seen in the last few years.
“Buyers should educate themselves about loan limits in their area and speak with qualified loan officers so they are making informed choices about their home purchase and the best loan option for their personal financial situation,” Bachaud concluded.
