Jumbo Mortgage 101: How to Find Your Counties Conforming Jumbo Loan Limit
By: Vanessa Rodriguez
August 25, 2010 (FreeRateUpdate.com) – Conforming loan limits are set by two government-sponsored enterprises (GSE), Fannie Mae and Freddie Mac. These loans are labeled “conforming” because they adhere to the underwriting standards also established by the GSEs.
Since the 1970s, Fannie Mae and Freddie Mac have established the guidelines for lending. Each year, they evaluate and establish the terms and conditions for conforming loans. Following the mortgage market crisis in 2007, Fannie and Freddie tightened up lending standards, such as higher credit scores and higher income requirements. However, one aspect that has loosened is the loan limit.
In February 2008, President George W. Bush signed into law the Economic Stimulus bill, which increased the single family residence loan limit to the lesser of $729,750 or 125% of the median home value. This new jumbo conforming loan program was then adopted by Fannie Mae and Freddie Mac and is supposed to be in effect until December 31, 2010.
Conforming loan limits vary based on the type of housing and location. For a single family residence, the national conforming loan limit is $417,000 in most of the continental U.S and the jumbo conforming loan limit is $729,750 for “high-cost” areas.
Counties in which the average home price trumps the conforming loan limit are considered “high-cost” areas. Designated “high-cost” areas account for just 6 percent of the country. The most important factor to consider is median home values. San Francisco, for example, is considered a “high-cost” area. However, greater Chicago, including Lake County and Cook County, is limited to the conforming loan limit of $417,000 because of the steep variance in socioeconomic classes.
Conforming loans are insured by the Federal Housing Administration and purchased by Fannie Mae and Freddie Mac in the secondary mortgage market. This practice allows the GSEs to create a pool funds for lenders, which provides home financing and increases the availability of credit to borrowers.
The U.S. Department of Housing and Development allows prospective homeowners to look up mortgage limits at its website. First, the user sets how he or she would like to view the search results. The webpage allows users to sort search results based on county, county code, state, MSA, MSA code, and most recent search results. Next, the user selects a state from a drop-down list in the State open field. An option for “all states” is also provided, however additional fields, such as County must be filled in order to successfully search. The user can then type a full or partial county name in the open County field. Alternatively, he or she may insert a three-digit county code in the County Code field. The website also permits the user to type the full or partial name of a specific Core Based Statistical Area (CBSA.) If users are interested in a high-cost, but non-urban area, then he or she would type “non-metro” in the MSA Name field. After providing the required information, the user would select “Fannie/Freddie” from the drop-down list in the Category field and select the desired calendar year.
You can find your county’s loan limit here: https://entp.hud.gov/idapp/html/hicostlook.cfm