According to the latest news reports, the US government has decided to stop homes above $1 million from getting home mortgage loans for the first time in US history. The federal government is trying to take this step because of the rigorous appreciation in home mortgage rates and prices all over the country in recent years. According to further analysis, the mortgage market in the United States has been recently cool.
From the latest development, the maximum size of home mortgage loans eligible for backing by Fannie Mae and Freddie Mac will rise to around $1 million next year in high-cost markets like New York and Las Vegas. The Federal Housing Finance Agency said that the maximum home mortgage loans would rise from approximately $900 thousand this year to about $1 million next year.
According to some analysis done by mortgage companies, some parts of the country will see their mortgage loan limit raised to over seven hundred thousand dollars from its 2022 maximum of $647,200. Federal Housing Finance Agency is a federal organization that manages mortgage companies and other mortgage-finance organizations.
A statement released by the FHFA read, “For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the applicable loan limit will be higher than the baseline loan limit. HERA establishes the high-cost area limit in those areas as a multiple of the area median home value while setting the ceiling at 150 percent of the baseline limit. Median home values generally increased in high-cost areas in 2022, which increased their CLL. The new ceiling loan limit for one-unit properties will be $1,089,300, 150 percent of $726,200.”
The high-cost markets, in this case, are very few in the United States compared to other types of mortgage markets. Out of more than 3,000 counties and equivalents in the US, only about 100 are considered high-cost markets, according to the Federal Housing Finance Agency. Most of the time, high-cost markets mean higher home mortgage rates.
Mortgage Interest Rates Have Increased In 2022
The recent increase in limits by the federal agency will make it easier for borrowers who want to purchase one-unit homes. This particularly applies to those who are purchasing homes that are near the maximum limits. Also, the new update in mortgage loan limits by the federal government will bring up the criteria which make a home big enough to be backed by the federal government.
While existing home sales have fallen for nine months since the start of 2022, home mortgage rates rose very well in 2022. It reached as much as 7%, which has not been seen in nearly two decades.
The increase in interest rates made so many home buyers not buy in since the year began, and those who bought had to go over their budget.
Before FHFA set the conforming baseline limit, some non-bankers had raised their limits before the Federal Housing Finance Agency made the official announcement. Rocket Mortgage was one of the first mortgage companies that raised their mortgage loan limit before others followed. From a different analysis, it is not surprising that non-bank lenders raised the limit before the federal agency as they have done so in the past.