Mortgage Loan Limits Increased In 2020

A few weeks ago both Conforming Loan Limits and FHA Loan Limits were increased. It’s welcomed news for both industry members and homeowners. The increase in limits will allow borrowers to have greater access to more home loan products and better rates. For people who own homes (or about to buy a home) in California this will be a big incentive for those that were considering loan amounts that were just above the 2019 limits but are now included in the 2020 limits.

For those that don’t know the difference:

  • Conforming Loans are associated with Fannie Mae and Freddie Mac
  • FHA Loans are typically referred to as a “government loan” since these loans are backed by the Federal goverment. FHA stands for Federal Housing Administration.

Conforming Loan Limit Increase:

Conforming loans are by far the biggest part of total mortgage volume in California and across the nation. The felxibility, low down payments and low rates make Conforming loans very attractive for most homeowners and homebuyers.

The new base loan amount limit is $510,400 and that is through out the country. So if your loan amount is at that or below you might qualify for a conforming loan. For those in “high cost” areas” that number increases to $765,600. These are for one unit properties; primary residences, secondary residences or investment properties. Two, three and four unit properties comes with higher loan limits.

FHA Loan Limit Increase:

Like Conforming Loan Limits; FHA loan limits were also increased. In 2019 the FHA loan limit was $314,827 and in 2020 it will be $331,760. In 70 high cost counties the increase goes from $726,525 to $765,600.

These higher loan limits will help increase mortgage application volume in 2020 provided mortgage rates remain stable. The most popular loan term under Conforming and FHA loan programs is the 30 year fixed rate term. A forty year term has really never been that attractive to borrower’s (nor investors). Most people who obtain a FHA loan do a 30 year fixed rate (very few do a 15 year fixed rate term).