Great News For Buyers and Homeowners on Increased Loan Limits for 2023

By Doug Katz – 9/8/2022

  • Substantial increases in conventional conforming loan limits expected in 2023.
  • Many lenders are offering these limits now.
  • Government loans, such as VA and FHA, usually see similar bumps but no announcements have been made.

Every year Fannie Mae and Freddie Mac adjust the upper limit for loans that qualify as conforming.  This annual ritual is always exciting but it is especially so this year with home prices still high and rates rising as the Fed continues its efforts to curb inflation.  In recent years, many lenders offer the higher allowable loan limits ahead of the traditional January announcement.  This means that these terms are available now for both purchase and refinance transactions.  This gives buyers and homeowners some great opportunities to leverage the new loan limits.

Here are a few of the most beneficial.

    • BUYERS – If you are planning on buying and you price range was impacted by the limit, you can now likely broaden your search and still have the rate, terms and flexibility of a conforming loan.  Remember, jumbo loans are far more restrictive and expensive to borrowers and this changes that up to near three quarters of a million dollars.  If your lender does not currently offer these terms, you may want to re-apply elsewhere as this will save you a lot.
    • SELLERS – If you are listing a home, this may be time to evaluate the best price.  Remember, many buyers tailor their search to being able to put 5% or 10% down.  This change is much more beneficial if your pricing aligns with this if you are in a range that corresponds with the new limits and the typical loan structure that buyers are seeking.  This also opens up the possibility for 3% down options that were unavailable to buyers stuck in jumbo territory.
    • HOMEOWNERS – Refinances may now make sense for anyone who had to use a jumbo loan in 2021 or early 2022.  Because the terms for jumbo loans are higher than conforming, sometimes by a profound amount, the new conforming rates, although elevated from the same time last year may still be better than a jumbo originated under a better market.  It is definitely worth a call to a lender to see what they can do.
    • INVESTORS – This is a really a subset of all of the above, but it is sometimes not addressed enough when highlighting these changes.  More and more people are choosing to use investment properties for wealth generation and income.  This change gives them much more robust options when buying or refinancing a property to maximize the return on investment.
    • COURT ORDERED ACTION: As a footnote to all of these scenarios, anyone in a divorce situation should immediately update their list of options if this applies to them.  I work on a lot of deals and  the biggest mistakes is failing to continually adjust the assumptions to match the market.  For a  homeowner is a divorce situation who has a property within these limits, things are now radically different and the option to keep the house may now be viable or may provide a better financial situation post-divorce.

This may seem pretty intuitive and logical but you would be amazed at the number of people who neglect to exploit opportunities like this and end up paying a lot more both at origination of and over the life of a loan.  Situations where they may have had the winning bid on a home with a stronger offer, but fail to because they neglect to update their scenario are more common than you would think, especially if the current lender is unable to offer these terms until January.  Even worse, some buyers miss out on homes they actually could afford because they are do not act.  Regardless of whether you are buying, selling or your represent someone doing either, this news should give you some optimism about 2023 and should be the impetus to see how this announcement helps.