Increase in mortgage credit ceilings in 2020

Bright red, chaotic and frenzied – these are a few words that realtors have used to describe the Southwest Florida housing market in 2021. Now, some say they expect loan limits. real estate increases to energize it.

“Compliant limits and FHA limits have increased by approximately 18% for 2022,” said Marcus Larrea, team leader and co-founder of Palm Paradise Real Estate.

In Southwest Florida, cash buyers have taken over homes, but some families need a loan to make their dreams of home ownership a reality.

“There are a lot of families who are really struggling with loan limits,” Larrea said.

For example, FHA loans, which are backed by the government and require lower down payments, have a current limit of $ 356,360. With the increase, they will increase by approximately $ 65,000, so the new limit will be $ 420,680.

“This essentially allows home buyers to have more access to more inventory in Southwest Florida in a market where inventory is already a big issue,” Larrea said.

Loan limits are reassessed every year, and current increases only occur to keep up with rising housing costs.

“The average home price in Southwest Florida is currently over $ 400,000 and with previous loan limits of $ 356,000, these entry-level homes were not available, especially for first-time home buyers, ”Larrea said.

Compliant loans meet the limits set by the Federal Housing Finance Agency and the funding criteria of Freddie Mac and Fannie Mae. This is something to consider for lower interest rates. The new benchmark limit on these will drop from $ 548,250 to $ 647,200.

“Where a giant product could get you anywhere where you have to pay 10-20% down payment, that lets you make 5%, so again, it kind of stays in sync with the market,” said Ashlynn Weiss, Senior Mortgage Broker. with Clear Mortgage.

But when you hear about high house prices and buyers taking larger loans, you might ask yourself: does this mean the market is about to collapse?

“I wouldn’t be worried about a 2008-like scenario, mainly because the key element causing the problem at the time was lax underwriting standards,” said Professor Shelton Weeks, professor of real estate. at the FGCU.

Back then, people were buying houses they couldn’t afford, and the standards have become stricter since then. Dr Weeks agrees, increasing loan limits is really just a catch-up game.

“This reflects what has already happened in the market,” said Dr Weeks.

But with such a low supply, better homeownership could only drive up prices, due to growing demand.

“So it’s a double-edged sword. On the one hand, you are giving consumers more access to more inventory and on the other hand, you are also fueling house price increases, ”Larrea said.

Larrea said he believes the housing shortage is a long-term problem we need to deal with and said the solution is to build more houses. The problem the are supply shortages and wait times for materials.

Dr Weeks said today’s lending standards are stricter, which should prevent another crash. If you are looking for a home, the key is to look at your debt-to-income ratio to avoid becoming “poor house”.

“Go on a budget and stick to it. Don’t stretch out too much. You need to know what your spending habits look like, but these surprises come and we need to be prepared for them, so make sure you have enough cushion, ”said Dr Weeks.

For current owners of jumbo loans, Larrea said this might be a good time to consider refinancing to take advantage of the increased conventional loan limits.

Another change experts expect in 2022 is a slight increase in interest rates from current historic lows. This could possibly slow down demand and help with the inventory issue.