The limits of conventional and VA loans on the rise in 2021
The Federal Housing Finance Agency recently announced the mortgage limit that will apply to conventional and compliant VA loans in 2021. We’re going to get right to the point and tell you that they are increasing. The limit for 2021 is $ 548,250 for a 1-unit property, an increase of over 7.4% from last year.
The rest of this article will explain what it means if you’re looking for a mortgage, whether it’s a purchase or refinancing.
How are mortgage limits changing in 2021?
The $ 548,250 compliant loan limit applies to single-family homes located in the lower 48 states. In Alaska and Hawaii, the limit is $ 822,375. Limits for 1 unit properties in high cost counties will have their own locally set loan limits, which could go up to $ 822,375.
You will also have a higher compliant loan limit for multi-family properties between 2 and 4 units.
- 2 units: $ 702,000
- 3 units: $ 848,500
- 4 units: $ 1,054,500
When do these limits apply to your mortgage?
The FHFA sets limits on conforming conventional loans purchased by government sponsored entities Fannie Mae and Freddie Mac. For classic loans from Quicken Loans®, we are able to offer these new loan limits starting today.
The VA also follows these guidelines when setting the limits on their loans. For VA, these changes are effective for loans closed after January 1, 2021.
These limits do not apply to FHA loans. Unlike the national limits for conventional and VA loans, the FHA sets county-by-county limits. FHA loan limits will be set at a later date and applied to loans made after the new year.
Increasing compliant loan limits puts more power in the hands of the consumer. It allows people who already own a home to withdraw more money from their home equity. It also allows buyers to borrow a higher loan amount and in return lower it, in some cases. as little as 3% drop. While this isn’t a trivial amount, it doesn’t have to be your savings and you can reach your homeownership goal much faster. With a VA loan, no down payment is required.
Vs compliant. Jumbo Loans
If you need a mortgage that exceeds the compliant limits, you will need a jumbo loan. Due to the higher loan amount, you will have to meet some additional requirements to mitigate the increased risk taken by the lender or investor in the mortgage.
Quicken Loans requires most people who get a jumbo mortgage to contribute at least 10.01% for a down payment. The down payment requirements for VA jumbo loans are related to the credit rating and the amount of the loan. However, as with everything VA loans, you must be an eligible active duty member, veteran, or the surviving spouse of a person who died in the line of duty or as a result of a service-related disability.
In addition to a higher down payment, you will need more reserves. Reserves are funds set aside, usually in a savings account, that are not used in the mortgage transaction. The amount is normally measured as a number of mortgage payments, including principal, interest, property taxes, homeowners insurance, and homeowner’s association dues, if applicable.
While this can vary depending on who is investing in your loan, a good guideline for homeowners looking to secure a loan. compliant loan or 2 months of reserves. However, if you get a jumbo loan, you may need to have between 6 and 12 months of reserve payments depending on the loan amount, whether you are a first-time buyer and the size of your down. Payment. If you live in a multi-unit building, each property in addition to your primary residence requires an additional 6 months in reserve. In many cases, jumbo loans will require more reserve funds than compliant loans.
Finally, jumbo loans often require additional documentation.
These guidelines apply to jumbo loans issued by Quicken Loans. Other lenders may have different policies.
These compliant loan limits are important because they are generally easier to qualify than upper limit jumbo loan amounts. Therefore, limits have a real impact on your purchasing power.
To take advantage of these limits today, go ahead and apply for a mortgage! You can also call one of our mortgage experts at (800) 785-4788. If you have any questions, you can leave them to us in the comments section below.
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