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Loan Limit Milestone Announced

By Datta Khalsa, Broker

This week, Fannie Mae released their new annual limits and for the first time ever, the conforming loan amount crossed the $1 Million mark in Santa Cruz County—alongside the usual lineup of other select areas that occupy our “high cost” market category. In fact, it almost passed the $1.1 Million mark, zooming up by over $100K to $1,089,300.

What does this mean for homebuyers? Well, for one thing it generally translates to interest rate savings except in cases where the yield curve is inverted. It’s also easier to qualify for a conforming loan with lower DTI ratio or credit score requirements, and you also get a broader assortment of loan options, including the ability to purchase with a lower percentage down payment than a non-conforming loan.

Now a buyer with 5% down payment who qualifies can get a home for up to $1,146,600, and someone with 20% down can buy a home for $1,361,625 and get a conforming rate. It’s a little bit of good news to accompany the fact that rates are twice what they were.

But then, with available options like 3-2-1 buydowns and rates expected to improve over the course of the coming year, it should enable at least a few more buyers who may have been sitting out the past few months to re-enter the market.

For duplexes the limit went to $1,394,775. Triplexes went up to $1,685,850 and Fourplexes crossed the $2 Million mark, at a healthy $2,095,200, meaning that with 20% equity you can get a conforming loan on a $2.6 Million property with 4 units.

The new limits take effect on January 1, 2023, but they apply to any loan originated between now and then that funds after the effective date.

This bodes well for housing product coming on the market this coming Spring, like the 15-townhome project in Soquel that a partnership I represent is on schedule to complete around April, where we are planning to offer entry and mid-size 3 Bedroom homes right in that $1.15M to $1.25M range. We are on track to take reservations before the end of the year, and for buyers who can come up with 25% down, they can get a conforming loan on the largest model homes which we are planning to offer for $1.45M.

In addition to being able to get 3-2-1 rate buydowns, we have access to a lender who does 6-month presale rate locks for people wanting to secure their financing ahead of time so they can get in early to select the cream of the crop and actively plan and participate in the selection process, to pick their preferred colors and finishes to taste.

This comes at a good time, when our county’s housing inventory remains low and will give buyers hungry for options a chance to expand their list of available possibilities. And that could make for a nice holiday gift indeed.

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