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Rates are Improving & New Conforming Loan Limits
Good News on Rates: 8.00% mortgage rates do not exist for now! November was likely the best month for rates in decades. Measured in percentages of improvement we would likely have to go back to the 80’s to find a month where rates improved so dramatically. The 30-year fixed conforming rates dropped to 6.875% this past week. Jumbo loans for both primary and secondary homes held steady at 7.375%. The best way to finance the purchase of a lower-priced second home with a non-jumbo or conforming loan amount continues to be our blended rate option, where the cost of two loans results in a rate of 6.97%.
New Conforming Loan Limit: As mortgage advisors, we look forward to this announcement every year. For higher priced markets such as the Outer Banks, and other resort markets the impact is huge. According to Zillow, the highest home values on the Outer Banks are $925,181 in Corolla, $748,926 in Duck, Kitty Hawk, and Southern Shores which all share the same zip code, and $692,450 in Nags Head. Without these higher loan limits many buyers would be considered Jumbo loan buyers as opposed to Conforming. Just to re-familiarize our readers, Conforming loans are sellable in the secondary markets because they meet Fannie Mae’s underwriting criteria. This means independent mortgage companies and banks that make these Conforming loans only act as the servicing agents collecting payments, and forwarding the interest to the investor who buys these mortgages. Jumbo loans are held by the lender and are generally held by the banks as portfolio loans. Since jumbo loans are held on the banks’ balance sheet, they generally have tighter underwriting restrictions. Conforming loans allow for 50% Debt-To-Income (DTI) ratios, even with as little as 5% down for a primary residence, whereas Jumbo loans only allow typically for 43% to 45% DTI. These loan limits also have a significant impact on investment property financing, which in resort markets is a big percentage of all buyers. The new loan limit announced last week is $766,550. This means buyers of investment property can use rental income to offset the proposed payment on homes costing upwards of 1 million dollars. Just a few years ago in 2019, the Conforming loan limit was only $483,350, and as little as two years ago in 2021 the Conforming loan amount was $548,250.