By Doug Goelz, Mortgage Services
The Federal Finance Housing Agency just set new maximum amounts for conforming loans, so new loan limits that are the highest ever are now in effect. Because we live in a high‐cost housing area, borrowers in the Bay Area can get conventional loans up to these amounts for the following types of properties:
- Single unit (house or condo): $765,600
- 2 Units: $980,325
- 3 Units: $1,184,925
- 4 units: $1,472,550
While many borrowers still will need larger loans when they buy, the new conforming loan limits will let more borrowers use conforming loans for some or all of their purchase financing. For example, with 20% down, a loan of $765,600 will finance the purchase of a house or condo costing $957,000.
Even if a conforming 1st mortgage won’t provide you with all the financing you need to buy a property, a conforming 1st plus a 2nd mortgage (either a Home Equity Line of Credit or fixed rate loan) might be your best financing option.
Why would you want to use a conforming loan (even in combination with a 2nd mortgage) rather than a jumbo loan (a loan for more than the conforming maximum limit)?
Although jumbo loans are always available for large loan amounts, rates on conforming loans generally are lower than jumbo rates.
Also, the requirements for conforming loans are always easier than for jumbo loans. For example, jumbo loans generally have reserve requirements (i.e., liquid assets you need to have after closing) that can be tens or even hundreds of thousands of dollars. Conforming loans generally have no reserve requirements. In addition, conforming loans allow for lower credit scores than jumbo loans. Finally, conforming loans require less down payment (as low as 5%) than jumbo loans.
With the simpler guidelines and potentially lower rates with conforming loans, even if you already have bought property using jumbo financing, you may want to consider using a conforming loan as part of future re‐financing.
I am always happy to answer any questions about any mortgage financing you need. Feel free to contact me at 415‐730‐4665 or [email protected].
