The prices of homes in Middle Tennessee jumped 40% from 2021 to 2022. With this drastic rise in home prices, borrowers are having to look at loan options that are outside of the realm of a Conventional fixed rate loan. The Federal National Mortgage Association (also known as Fannie Mae) raised their conforming limit this year to $647,200, up from $548,250 in 2021, but in this market sometimes it just isn’t enough. According to Investopedia, the definition of a conforming loan limit is “the dollar cap on the size of a mortgage that Fannie Mae or the Federal Home Loan Mortgage Corporation (also known as Freddie Mac) will purchase or guarantee.” Mortgages that meet the criteria for backing by these two agencies are known as conforming loans and the limit is recalculated each year based on county. Most counties in the United States are assigned the baseline rate. Based on the mandate of the Housing and Economic Recovery Act (HERA) of 2008, the conforming loan limit is adjusted every year to reflect changes in the average price of a home in the United States and is reset in November for the following year.
Most people have heard of doing a first and second mortgage in situations where there is a need to borrow a higher loan amount than Fannie Mae’s conforming limit. This works in most cases, but the borrower then ends up with two mortgage payments instead of one and if they ever want to refinance the home, they will have to do a cash out refinance to combine the two loans. This is one instance where a jumbo loan could help.
If you plan to purchase a home that costs $500,000 or higher, a jumbo mortgage may be a good option for you to consider. Keep in mind however, that in order to qualify for a jumbo loan, you will need to meet more strict credit requirements than if you were applying for a conventional loan because jumbo loans carry more credit risk for the lender. You will need to have a very strong credit score with low debt and be able to show adequate assets to cover the increased mortgage payment. The increased risk comes from the higher amounts of money borrowed and the fact that these loans are not guaranteed by Fannie Mae or Freddie Mac.
There are multiple loan options available to a home buyer that are specific to individual financial circumstances. Contact me today to find out how we can help you get into that dream home! Brittney Campbell/Citizens Bank 615.491.4744 NML#184975. Always remember...
"You've Got A Friend in Real Estate"
Jarod Tanksley 615.403.8265
Brentview Realty 615.373.2814