Jumbo mortgages are about to get a whole lot bigger.
On Nov. 23, the Federal Housing Finance Agency announced that it will raise the conforming loan limit on jumbo loans from $417,000 to $424,100 beginning in 2017, Bloomberg reported. In areas where it is more expensive to purchase a home - such as San Francisco or New York City - government lenders Fannie Mae and Freddie Mac will raise the limit from $625,500 to $636,150, the source noted.
The move might make it easier for some potential homeowners to purchase a house, according to Bloomberg. Conforming loans are different from other mortgages because they meet criteria that allow Fannie Mae and Freddie Mac to purchase it and package it with others to sell to investors, The Wall Street Journal reported. Conforming loans can be attractive to mortgage applicants because they usually come with lower interest rates due to the higher value of the loan.
The announcement is a reaction to rising home prices, according to The Wall Street Journal. The government is trying to keep homes affordable for individuals by increasing the amount of money they can borrow, the source noted.
"When you raise the limits, it's about giving young, successful people the chance to get in the game," Phil Ganz, a Boston-based loan officer, told Bloomberg.
When legislators created the law that established the original limit, they made it so the limits could not be raised until home prices returned to their levels in the third quarter of 2007, according to The Wall Street Journal. Home prices are now 1.7 percent higher than during that time period in 2007, so the limit was raised by that amount now, the source noted.
Experts say raising the limit might raise some concerns from Republicans in office about government increasing its role in the housing market, Bloomberg noted.