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This New Mortgage Change Could Increase Home Prices - YouTube
Channel: Win The House You Love
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well this is good news for some and bad
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news for others two lenders are leading
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the way to increase the conforming loan
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limit for conventional loans to 625 000
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as the average home price keeps
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increasing a lot of people hit the
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ceiling of how large of a loan they can
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get with a conventional mortgage and as
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soon as they get a mortgage that's
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bigger than the maximum allowed by
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conventional loans even one dollar more
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than the maximum allowed by conventional
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loans they have to use what's called a
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jumbo loan which usually requires 10
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percent down and is a lot tougher to
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qualify for so here's the change with
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the new loan limits in 2022. in 2021 our
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old limit was 548 thousand 250
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dollars this is increased just over 75
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000
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to six hundred and twenty five thousand
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dollars as the maximum loan limit keep
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in mind this is the loan limit not just
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the purchase price so the purchase price
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is even higher than this as well so this
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is kind of how this works in this range
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here we have conventional loans all the
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way down from you know zero dollars up
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to what the old limit was and now the
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new limit if you buy a home under that
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range under that loan amount you can
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qualify for a conventional loan with
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three percent down as a first-time
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homebuyer okay i know there's many
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people in the comments are like but it's
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actually 20. it's not it's three percent
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down for first-time home buyers on
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conventional loans those are the rules
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okay if you're a lender is saying
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something different work with another
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lender so when you hit this limit here
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even if you are above this by even one
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dollar you then have to get a jumbo loan
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jumbo loans are not conventional loans
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you then have to most the time put 10
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percent down there's all different types
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of jumbo products that range all over
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the place with different requirements
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but 10 down is what you're going to run
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into most of the time normally there's a
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lot higher credit
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score minimum and they can be tougher to
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qualify for on your debt to income ratio
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and if you're self-employed they can ask
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for a lot more documentation as well so
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these loans are a lot more difficult to
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get now this is what's happened here
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with the purchase price we already
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talked about the difference in the loan
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change from
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2021
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to 2022. well this took 2021's maximum
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purchase price with three percent down
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on a commercial loan of 565 thousand two
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hundred and six dollars
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to
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six hundred and forty four thousand
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three hundred and twenty nine dollars as
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a maximum purchase price so this now
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means you can buy a home with a
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conventional loan that's almost 80 000
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higher in purchase price than you could
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in previous years just based on the loan
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limits here now obviously you stuff to
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be able to qualify for those payments
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and get approval without loan but with
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these max limits increasing you're now
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able to buy home that's 80 000 more
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expensive and so what you're going to
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find with this as well is likely people
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who will be able to put in higher offers
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as home values continue to increase
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they're going to have more leverage with
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conventional loans because before they
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might not have been able to use that
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leverage without getting into a jumbo
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loan that maybe they couldn't qualify
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for now that more people have access to
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these conventional loans you can see
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this is eighty thousand dollars more in
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purchasing power that you could actually
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offer more on a home again with the
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caveat that you still have to be able to
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qualify with that higher loan payment
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but what's weird about this year's
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change is the fhfa hasn't actually
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released their new loan limits yet see
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every year around november the fhfa
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releases their maximum conforming loan
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limits now don't confuse the fhfa with
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fha fhfa is the federal housing finance
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agency and they're the regulatory agency
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that oversees fannie mae and freddie mac
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and fannie mae and freddie mac make the
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rules for most conventional loans so
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things like what's the minimum credit
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score what's the down payment that's
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income ratio things like that so think
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of fhfa like fannie mae and freddie
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mac's parents each year fhfa updates
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their maximum conforming loan limits to
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follow along with changes in the u.s
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home price so to prepare for the change
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the lender penny mac said they would now
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accept loans up to 625 000
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and the wholesale lender united
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wholesale mortgage said they would do
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the same exact thing and if you're
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actually not quite sure about what price
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range you are in i have a video where i
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cover all the formulas loan officers use
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to find your maximum purchase price so
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you can then find what price range is
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comfortable for you now this increase in
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loan limit is great news for people who
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are buying within the range of 550 000
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and higher because a conventional loan
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is an easier loan to qualify for than a
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jumbo loan so buyers who are facing
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struggles of not being able to qualify
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in an expensive market will now have an
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easier time qualifying for a
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conventional loan with a lower down
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payment on the other hand though the bad
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news is that the higher home prices are
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going to be easier to qualify for
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because conventional loans are easier
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than jumbo loans potentially causing
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that price range of homes to get more
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competitive as more buyers in that range
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have access to easier finance now it's
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interesting to see the actual changes in
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the loan limit and the median home price
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over a period of time so this chart
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starts in 1981 and goes all the way to
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2021 and so we can see here in the green
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we have the median home price so
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obviously we had this dip here in the
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2008 housing crash in values of homes
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and we're seeing this trend increase
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pretty significantly over the past few
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years
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and then we can also see the loan limit
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the loan limit has always been charting
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along with the home price as it's
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increased and we can see this huge
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difference now
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especially with 2022's numbers of the
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loan limit already here we can see how
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big of a gap this is how big this
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increase happened in this previous year
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so what's interesting is fhfa is
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basically saying they don't see home
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values decreasing otherwise they would
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have kept stability within this loan
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limit here like they did near the
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housing crash so it will be interesting
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to see something very similar happened
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before the housing crash where we had
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this really big increase
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in the loan limit as well and then we
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saw home values decrease afterwards
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correlation doesn't equal causation so
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it doesn't mean that because the loan
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limit increased so significantly that
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there will be repercussions on the other
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side but it is interesting to take a
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look at what's happening
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with the data that we see in the past so
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at this point we'll have to wait to see
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what fhfa's actual loan limit change
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will be for 2022 it's likely that fhfa
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will increase their maximum loan amount
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to 625 thousand dollars or somewhere
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around there after all pennymac and uwm
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are confidently accepting this as a new
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loan limit since fhfa tracks their loan
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limits with their house price index
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which is showing a 19.2 percent
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year-over-year price change pinning mac
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and uwm basically jumped the gun based
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on the data that came out and hopes that
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they could be the first ones to get in
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on the action now this all begs the
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question how much home can you actually
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purchase two hundred fifty thousand
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three hundred fifty thousand six hundred
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thousand and two questions in there are
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how much could a lender approve me for
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and what's an actual comfortable payment
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for my budget and to know your max
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purchase price you'll want to use the
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same formulas that loan officers use and
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in this video i'll teach you how to find
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your maximum purchase price the same way
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lenders do so you can have a ballpark
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idea without having to talk to a loan
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officer right away
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