Category: News & Events

When applying for a mortgage, one of the most popular options is a conforming loan. These loans are called “conforming” because they conform to the guidelines set by Fannie Mae and Freddie Mac, federally backed home mortgage companies created by the U.S. Congress to boost homeownership.

What do Fannie Mae and Freddie Mac Do?
These entities exist only to support the U.S. mortgage system. They don’t originate loans. Instead, after a loan has been issued, one of the entities will buy the loan from the lender if it meets their criteria. This is an important part of the mortgage market because it allows lenders to sell loans to Fannie Mae and Freddie Mac and use the cash raised to engage in further lending.

For a loan to be purchased by Fannie Mae or Freddie Mac, the borrower generally needs:

• A good credit score
• A debt-to-income ratio of 50% or less
• At least 3% down payment
• A loan amount of less than conforming loan limit

2021 conforming loan limits
Each year, the Federal Housing Agency decides what the conforming loan limit is. As houses become more expensive, the limits are increased. In 2021, the amount increased for all units.

­­

Base limit: This is the maximum loan amount for homes in most areas of the United States.

High-cost limit: This is the maximum loan amount for homes in high-cost markets such as parts of Alaska, Hawaii, California, and Washington, D.C.

Units: The number of housing units per building.

More >> See what the conforming loan limit is where you live.

Because conforming loans can be re-sold, they’re not as risky for lenders and often have favorable terms for borrowers. Savvy home buyers will keep their loan amount within the conforming loan limits so they have an easier time securing their loan, they’ll have more relaxed requirements, and their rates will probably be better.

If you’re looking for a conventional 15 or 30-year loan (as most people are), you may want to consider keeping the loan amount under the loan limit in order for it to be a conforming loan.

When you need a bigger loan – consider a jumbo loan
If the limits won’t get you a home you’re interested in buying, you could look into a jumbo loan. Jumbo loans won’t be purchased by Fannie Mae or Freddie Mac, so they don’t need to conform to their loan limits – meaning you can get more money. If you have a strong credit score and low debt-to-income ratio, you may find a lender willing to extend one to you.

However, they come with some disadvantages. Jumbo loans have stricter qualification rules, require a sizable down payment (sometimes 20% or more), and normally have a higher interest rate. For those reasons, a lot of homebuyers try to avoid them by finding a home that will keep them within the conforming loan limits.

To see whether you’ll be eligible for a conforming home loan, contact your local Mann Mortgage home lender. Together, they’ll help you crunch the numbers to see what type of loan would be best for you.

There’s no doubt that Covid-19 has impacted how Americans are buying and selling their homes. Social distancing rules, historically low interest rates, and more people working from home have all changed, but certainly not stopped, home sales. 

What homebuying trends can we expect to continue through 2021? 

Virtual home tours

Don’t assume you’ll be able to attend open houses or leisurely tour homes on the market. In order to limit exposure to COVID-19, many sellers allow just the realtor and buyer into the house – with masks and gloves on, of course. No children or extra family/friends are allowed. Last year when Zillow surveyed  home sellers, 43% of them said they’re likely to try to sell their homes entirely online. 

Faster internet connections and better technology have given real estate agents a new tool – virtual tours. In addition to posting better photos, sellers’ agents are offering 3D virtual tours as part of their home listing. If you’d still like to see the home for yourself, your real estate agent can schedule an online video meeting. That way, you can watch a live video, ask questions, and talk to your agent while they tour the home for you. 
 

Low interest rates

Rates have dropped like they’re hot. They’re the lowest they’ve been in 50 years, and they’re projected to stay low. Mortgage interest rates are partly based on what the Federal Reserve sets for the federal funds rate. And Federal Reserve Chairman Jerome Powell told NPR in an interview in September 2020, “We think that the economy’s going to need low interest rates, which support economic activity, for an extended period. It will be measured in years.”  

Low interest rates are a boon to home buyers. Last year, 30-year fixed mortgage interest decreased by 1.07%. On an average home loan of $250,000, that’s a savings of about $150 each month between the two rates. That means buyers can afford more expensive homes – and they’re going to need those rates to stay low to compete in this real estate market. 

Sellers’ market with bidding wars

We’re generally in what’s considered a “seller’s market”. In many areas, more people are looking for houses than there are houses available. A sellers’ market means we can expect home prices will continue to rise, though experts predict it will happen at a slower pace than we saw in 2020. 

To buy a home in a seller’s market, be prepared to have a better offer than your competition. More than 20% of homes in the U.S. market are selling above their asking price, according to a recent Zillow report. Most commonly, it’s happening among homes priced below $259,906. And Redfin reported more than half of all offers were involved in bidding wars from May through November 2020. That means multiple offers at the same time, often driving up the price above what it was listed for in hope of winning the home. 

Fast-moving inventory

Homes were averaging five days less on the market in 2020 then they were just a year before. Zillow reports homes spent an average of just 25 days on the market before accepting an offer. In September, homes moved even faster – the average was under contract in just 16 days. 

What does all this mean for home buyers? When you see a house that fits your needs, make an offer quickly and be prepared to find out others have made an offer as well. Competing for homes can be an emotional roller coaster. Your best bet for staying level-headed is to work with your loan officer to set your budget and be prepared to walk away from a home you can’t afford.