Christmas isn’t just an exciting time of the year to enjoy the company of friends and family, the holidays are also very important for anyone with an interest in the real estate market. That is because each November the Federal Housing Finance Agency sets its conforming loan limits for the following year. These new limits were recently announced by the FHFA, and if you are looking to purchase property in Colorado, there is plenty to look forward to in 2022.
WHAT CHANGED?
You may recall from previous Mortgage Maestro Group blogs that conforming loans are mortgages that can be purchased and insured by the two main government-sponsored real estate companies, Fannie Mae and Freddie Mac. Every year in November, a nationwide rate is set by the FHFA based upon changes in home prices and other economic factors in order to determine which loans will conform and which will not. For example, if the conforming loan limit is set at $500,000, any mortgage greater than that will be considered a jumbo loan. Whether a loan is conforming or jumbo can affect a number of important factors for lenders and buyers, which we will get to in a minute.
NEW NUMBERS
For 2022 the standard nationwide conforming loan limit was set at $647,200, but there is an important catch. The FHFA can set higher loan limits for counties where home prices are significantly greater than the nationwide average. This means that the floor is higher before buyers have to begin to address jumbo loan requirements. As you might expect, counties in large metro areas like Los Angeles, New York and Chicago usually have loan limits set higher than the nationwide standard. For 2022, Adams, Arapahoe, Jefferson, Elbert, Park, Clear Creek and Denver counties have been set at $684,250, Routt is $678,750, Boulder $747,500, San Miguel $756,700, Garfield Pitkin: $856,750, Summit: $822,375, and Eagle: $862,500. Another sign that Colorado is a desirable place to call home. Along with signs prices aren’t projected to come down in the housing market.
GOOD NEWS
For starters the higher loan limits in and around the Denver area are an indicator that the local real estate market in the area is incredibly strong. Outside of longstanding major metro centers like San Francisco, Los Angeles and Washington DC, no other area of the country has such a large area with expanded rates. This is good news for another reason as well. It is not that purchasing a home and financing above the conforming loan limit is necessarily a bad thing, but there are certain benefits to keep in mind for conforming loan amounts. It is often easier to obtain a loan under the limit in the first place, as lenders will then be able to sell the loan to Fannie Mae or Freddie Mac. Conforming loans do not have residency requirements like some jumbo loans, which means you can use them for vacation properties or real estate investments. Conforming loans often have more attractive interest rates, which typically means lower closing costs. Keep in mind that just because a property is above the new conforming loan limit, a jumbo loan is not your only option. Properties above the limit can often still be purchased with conforming loans if you make a larger down payment that makes up the difference. Or we craft a solution that allows you to still obtain a conforming interest rate. Anyway you slice it, this is good news for buyers and sellers in the Denver area, so give us a call at Mortgage Maestro Group and we can get you on the path to your dream home.
