Your Mortgage: The gift of more money


Mike Miles
Mike Miles

By Mike Miles

It’s like the Federal Housing Finance Agency (FHFA) planned the required review of conforming baseline loan amounts to be a gift that keeps giving all year. Jelly club anyone? The Housing and Economic Recovery Act requires conforming loan amounts to be adjusted each year to reflect the change in the average home price. Seasonally adjusted, home prices increased 6.9 percent between the third quarters of 2017 and 2018. Therefore, the conforming loan limit for 2019 will be increased by the same percentage.

In English please (as Ron Burgundy might say)…

So, what does this mean? It means the maximum conforming loan amount will increase from $453,100 to $484,350. Why is this important? It’s important because for anyone borrowing money in this price point range can now borrow up to the new loan limit without being affected by jumbo interest rates.

Historically, jumbo interest rates have been about .25 percent higher than rates associated with non-jumbo loans. Jumbo loans start at $1 above the maximum conforming loan limit. Merry Christmas! You just got a gift of $31,250. Well sort of. It’s really a gift of the saved interest (jumbo to non-jumbo) and it’s about $28,000 worth of an interest-saved-gift.

The Federal Housing Administration (FHA) typically will do a similar review each year and follow the maximum-loan-increase train. FHA’s loan amount will increase from $318,550 to $336,950 for 2019. The difference between the conforming and FHA loan limits is that FHA does not have a jumbo version of itself. That means that you literally can’t finance more than the maximum allowed. Conversely, conforming loans can exceed the loan limit — but then you are dealing the jumbo category requirements.

What about VA loans? We can’t leave them out right? Its loan guarantee amounts follow the conforming loan limits, so it increases as well.

In short, these increases reflect a very healthy real estate market during the past year and raising the loan amounts further expand a borrower’s ability to borrow funds at a lower level of overall costs. We encourage anyone considering getting a new house and/or mortgage to call our team of experts.

This is what we do. All day. Every day.

This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268