{"id":6573,"date":"2016-04-26T07:33:47","date_gmt":"2016-04-26T07:33:47","guid":{"rendered":"https:\/\/www.movoto.com\/foundation\/?p=3751"},"modified":"2016-04-26T07:33:47","modified_gmt":"2016-04-26T07:33:47","slug":"conforming-mortgage-loans-how-2016-conforming-limits-affect-your-borrowing-potential-2","status":"publish","type":"post","link":"https:\/\/www.movoto.com\/blog\/conforming-mortgage-loans-how-2016-conforming-limits-affect-your-borrowing-potential-2\/","title":{"rendered":"Conforming Mortgage Loans: How 2016's Conforming Limits Affect Your Borrowing Potential"},"content":{"rendered":"

Each year, the Federal Housing Finance Agency (FHFA) reviews current mortgage loan amount limits and revises them if needed. Lenders of conforming mortgage loans<\/a>\u00a0will not lend in amounts that exceed these limits. While you can get a mortgage that’s not a conforming loan, they are going to cost you more money in fees and interest. If you’re looking to purchase a home on the high end of the spectrum, these limits may impact how and where you buy.<\/p>\n

What Is a Conforming Loan?<\/h2>\n

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The federal agencies Fannie Mae and Freddie Mac are the largest purchasers on the secondary mortgage market. By law, these agencies cannot purchase loans that exceed the FHFA limits.\u00a0Conforming loans must also meet other Fannie Mae and Freddie Mac guidelines, such as keeping within their stated debt-to-income ratio (DTI), adhering to their credit requirements\u00a0and providing proper documentation on the loans.\u00a0Since lenders know that there is a high probability that these mortgages will be purchased on the secondary market, they have less risk and are able to offer more attractive rates to home buyers.<\/p>\n

Why Are There Loan Limits?<\/h2>\n

These loan limits are a result of the Emergency Home Finance Act, which was signed into law by President Nixon in 1970 and\u00a0was intended to make additional funds available to the home mortgage market. Inflation was rampant during the 1970s, and the housing market suffered because of it. When the FHA raised the interest rates on its mortgage to 8.5 percent, lawmakers stepped in passed the bill, which also created Freddie Mac which was supposed to help stimulate the secondary mortgage market.<\/p>\n

The government put these loan limits into place because the audience for the programs it built was the lower-to-middle income demographic. Lenders can and do issue loans, called jumbo loans, that exceed these limits, but they cannot be purchased by either Fannie Mae or Freddie Mac.<\/p>\n

What Are the Limits for 2016?<\/h2>\n

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There was very little change in the loan limits set by the FHFA\u00a0for 2016. Each county across the country is assigned a limit<\/a>. Most counties are limited to the lowest amount while major metros have much higher limits. Some counties fall somewhere in between. The limits for 2016 are:<\/p>\n