Jumbo Loan Limits for 2016

Jumbo Loan Limits 2016



When looking for a jumbo loan in order to get your dream house it is important to understand what a jumbo loan is, as well as how it is defined. The inverse of a jumbo loan is known as a conforming loan and serves as the basis for what a jumbo loan is. A conventional loan is any loan up to an amount of $417,000 dollars that is backed by either Fannie Mae or Freddie Mac and consequently the Federal Housing Finance Agency, also known as the FHFA. This limit is also a general one, as in some high cost areas the limit is raised to account for any discrepancy in the amount of money needed.

A conventional limit defines a jumbo loan, this is because any loan not considered to be a conventional loan is by definition a jumbo loan. This loan has been established at this base line of $417,000 since 2008 when it was established by the Housing and Economic Recovery Act of 2008, also commonly referred to as HERA.

“The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.  The $417,000 loan limit will stay the same for 2016 because FHFA has determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007.”

“HERA provides for higher loan limits in high-cost counties by setting loan limits as a function of area median home value.  Although the baseline loan limit will be unchanged in most of the country, 39 specific high-cost counties in which home values increased over the last year will see the maximum conforming loan limit for 2016 adjusted upward.  Although other counties also experienced home value increases in 2015, after other elements of the HERA formula—such as the statutory ceiling and floor on limits—were accounted for, these local-area limits were left unchanged.” – Source