Following rising house prices around the country, the Federal Housing Finance Agency has announced an increase in conforming loan limits for 2018. But what does that mean for home buyers in the Seattle area?
An increase in conforming loan limits means it will be possible to secure an even larger housing loan and still conform to federal loan guidelines. Mortgage finance titans Fannie Mae and Freddie Mac are only allowed to buy loans that match those guidelines. The FHFA’s House Price Index showed a rise of 6.8 percent, so the baseline loan limit is going up by the same percent. Getting a loan for a more expensive home just got easier!
For mortgages that close in 2018, the baseline limit for a loan for a single-family dwelling is $453,100, which is up from $424,100. This is an increase much bigger than the increase announced in January 2017, which raised the limit by only $7,100 compared to this year’s increase of $29,000. Before these two years of increases, the housing market had not seen a conforming loan limit increase since 2006.
New Loan Limits in the Seattle Area
Around Seattle, where home values are even higher than the average in the country, loan limits are much higher than the nationwide baseline as well. Given that the conforming loan limit last year was below the median home value in the Seattle area, the additional increase this year will be a big help to new home buyers.
In the Seattle metro area, and in all of Pierce, King and Snohomish counties, the 2018 conforming loan limit for a single-family home is now $667,000, whereas last year it was only $592,250. Any loan that’s bigger than that would qualify as a jumbo loan. For investors looking to buy a two-unit property, however, the loan limit would be $853,900. For a three-unit property it’s $1,032,150 and for a four-unit property it would be $1,282,700.
These increases in the loan limit were regular and predictable according to the Housing and Economic Recovery Act (HERA). HERA requires the loan limit to be set according to the median home property value in an area. Seattle’s especially high housing costs shape the loan limit for the entire surrounding area under this system. Seattle is among the cities and counties with the highest loan limit in the nation. Cities like New York and Los Angeles have the highest limit of $679,650 compared to Seattle’s $667,000 for single-family properties.
Taking Advantage of the New Opportunities
For home buyers in the Seattle area, the time to act is now. Now that the loan limit has increased to match local home values, it’s become a lot more affordable to take the first steps toward buying a house. With bigger loans, buyers in these more expensive areas will often be able to make much more affordable down payments of only 3 percent or 5 percent instead of having to go as high as 20 percent to bridge the gap.
Wherever the housing market goes in the rest of 2018, the loan limits can’t be adjusted until January of 2019. Individuals and families looking to make a purchase in 2018 should consider taking advantage of this opportunity to acquire a mortgage more easily before conditions change.