With home prices in Massachusetts climbing so high, many buyers find themselves struggling to win bidding wars. One of the constraints on buyers is their loan limit. Thankfully, those limits have increased for 2019. How will these increased lending limits help MA home buyers better compete? Here’s a closer look.
What Are Loan Limits
FHA and conforming loans are those that can be sold into the secondary mortgage market, and are therefore among the most common type of loans used by home buyers. These loan programs have limits that are set yearly based on average home sales. Any loan amounts above those limits would be considered jumbo loans, which normally have less favorable terms, higher interest rates, and stricter qualification criteria. Some buyers simply do not qualify for jumbo loans and must therefore stay within the limits set for their designated mortgage programs.
2019 Increased Loan Limits
In the Greater Boston area, the loan limits for single family homes for 2019 is $688,850 for both conventional and FHA loans. The maximum purchase price would be based on a buyer’s down payment amount.
5% down => $725,105
10% down => $765,388
15% down => $810,411
20% down => $861,062
How Loan Limits Impact Bidding Wars
With home prices rising so high in Massachusetts, many home buyers find themselves at the maximum range for conforming loan limits. Let’s assume the loan limit is $679,650. A buyer putting 5% down can buy up to $715,421. That buyer would have difficulty competing beyond that ~$715k mark unless he/she is willing to put more cash down.
Under the new loan limit of $688,850, that same buyer could purchase up to $721,105 with 5% down. This assumes, of course, that they do qualify for the higher loan amount and monthly payment. Thus, increased loan limits help MA home buyers better compete by allowing them to borrow more and therefore pay more for homes. This is extremely helpful for buyers who qualify for more but were restricted by the loan limits.
Both buyers and sellers benefit from increased loan limits. Buyers gain more spending power and can better compete. Sellers get higher prices from increased competition. It seems like a win-win for the real estate market. Changes like this also help keep the market active and strong. Let’s hope interest rates continue to help this cause by remaining low during 2019!