Conforming Loan Limits Effecting Mortgages in 2018
In the Dallas Fort Worth and surrounding cities, the new loan limits for single family 1 unit homes will go up to $453,100. Starting Jan 1, 2018, you can now buy a home and use the preferable benefits of conventional/conforming loan products as long as your loan amount is at or below $453,100. You might remember, years ago jumbo mortgage lending had lower limits.
Conforming vs Jumbo
One of the major reasons this is an option that will benefit many home buyers in 2018, it is directly tied to the fact that home values have increased so much in recent years. When a buyer has to borrow money to the extent their loan is greater than the conforming limits, they then must use jumbo financing, and there are a number of factors that come into play with jumbo financing that are more restrictive then conforming. To hit just the surface, some of the loan costs and rates are going to be a bit higher than a normal conforming loan, and jumbo financing also requires a larger down payment.
Stategy to Avoid Jumbo Financing
The most common way to avoid using a jumbo loan that benefits the borrower…the one tool in my tool belt as a 14 year veteran loan officer that has been the most effective, is the combo loan option. Lets say you are buying a $600,000 home. If you didn’t have enough cash, or just didn’t want to use all your cash, even putting 20% down in this situation, you would still have a jumbo loan…80% loan on a $600,000 purchase is $480,000, which is still $26,900 over jumbo pricing. You can get a 2nd lien for that $26,900, and now you have a loan structure with a 1st lien of $453,100, and a second lien of $26,900. In this situation, you avoid PMI, and the higher costs for a jumbo loan. This structure also works if you don’t have enough cash to put down 20% and you are trying to avoid paying mortgage insurance as well as jumbo guidelines. Say you are putting down 10% on a $600,000 purchase. Your first loan would be $453,100, and now your second lien would be $86,900.
There are some very specific benefits that come with this 2nd lien option that benefit your equity situation greatly over time. Call me to talk more about this, or apply for a mortgage with my team and I.