Regulator Could Reduce Maximum Loan Amounts for Freddie Mac, Fannie Mae Mortgages

Those who look to mortgages insured by Fannie Mae and Freddie Mac may have less to work with in the future, if a recent report holds true.

The Los Angeles times reports that regulators could cut the maximum amount for mortgages backed by the financing giants, which is currently at $417,000 for the majority of the country and $625,500 for higher-end communities featuring luxury homes.

“FHFA has been analyzing approaches for reducing Fannie Mae and Freddie Mac loan limits across the country, and any such change would be announced with adequate advance notice for implementation on Jan. 1,” the agency said in a statement on Sept. 9.

So there’s still plenty of time to secure a mortgage backed by Fannie Mae and Freddie Mac, under the original loan limits, before any reductions could be made.

Part of the reason for keeping the limits where they currently are at is to further bolster the recovering housing market. Although increasing home sales and prices over the past year throughout much of the country has signaled somewhat of a return to normalcy for the U.S. housing market, there is still some speculating that it isn’t all the way there yet. Reducing the loan limits could lead to the housing market regressing, some analysts predict.

Jumbo mortgages also an option
Even if the loan limit reduction passes, prospective borrowers can still benefit from jumbo mortgages, which are designed to pick up the slack where standard loan limits fall short. In fact, the news source reports that jumbo mortgage applications are already increasing, as loan guarantees from Freddie Mac and Fannie Mae are no longer cutting it on some instances.

With mortgage rate averages ticking upward, interested home buyers need to do everything in their power to give themselves the best chance at a low rate mortgage. Having a satisfactory credit score goes a long way, and can make the cost of a home inconsequential as a low rate mortgage leads to affordable payment options.

Contact us today to learn more about your financing choices when buying a new home.