September 9

2023 Conventional Loan Limits Get Boosted | 2023 Conforming Limits


September greeted us with some excellent news. The 2023 conventional loan limits have been announced by several of the nations top lenders and are slated to be $715,000 for most of the country. Additionally, this means that in certain high cost areas as well as AK and HI will have conventional limits as high as $1,072,500 (or somewhere in between).

November greeted us with even better news. Read on for more……

Was it FHFA that Announced Higher 2023 Conventional Loan Limits?

Every November FHFA announces the conforming / conventional loan limits for the following year. Leading up to that time a few (definitely not all) larger wholesale lenders make the move and raise the conventional loan limits internally.. These lenders base the 2023 conventional loan limit move on data from many sources. In short, the loan limit move is based on home sales data on a nationwide basis.

As for the high cost areas, those conforming / conventional loan limits are normally 1.5 times the normal loan limit amount. That’s how we arrived at the $1,072,500 loan limit figure for high cost areas. However, not all high cost areas will be as high as the maximum loan limit of $1,072,500. Some higher cost areas could be more than $715,000.00, but not necessarily set at the max. They may be set somewhere in between.

Actual 2023 Conventional Loan Limits

On November 28, FHFA announced the ACTUAL 2023 loan limits and they are higher than projected. The new loan limit for a single family home is set to be $726,200 for much of the country. In high cost areas, they can potentially be 1.5 times that amount or $1,089,800 in dollars and cents.

Can These New Loan Limits be Funded Now?

Yes and no. Some of the bigger lenders take a calculated risk and offer financing based on what they think the new loan limit will be. These lenders will fund the loans effective now. Hence, great brokers like LifeSource Mortgage that are aligned with the best lenders out there, can offer loans with the new limits. Ultimately, FHFA will announce the ACTUAL 2023 conventional loan limits in November. However, these lenders are usually VERY close, but the actual loan limits sometimes end up being slightly higher. We’ll update our blog post entitled Orange County Loan Limits at that time. We’ll also announce the 2023 reverse mortgage limits at that time as well.

What do Higher 2023 Conventional Loan Limits Mean for Home Buyers?

In very basic terms, a conventional or conforming loan is easier to qualify for than are jumbo loans.  In fact, Fannie Mae and Freddie Mac (they both back conventional loans) each have software that analyzes all of a borrower’s loan characteristics. After analyzing all of the borrower’s loan characteristics, the software actually makes an under writing decision.  Here is a brief list of some of the things that the automated underwriting software looks at – home value based on the address input, credit, monthly obligations via the credit report, income, and more.  When the automated underwriting grants an approval, lenders and brokers simply need to validate what was input with a paper trail (paystubs, banks statements, etc.) for the human underwriter. 

What are some of the advantages in terms of conventional loans vs jumbo loans:

  • automated approvals often times grant a PIW.  PIW is an acronym for Property Inspection Waiver.  If your loan is approved with a PIW, it means you don’t need an actual appraisal.
  • Interest rates are lower on conventional loans than on jumbo loans.  This makes your loan payment more affordable.
  • Along with the fact that conventional loans have lower interest rates, they can potentially allow for higher debt to income ratios (up to 50% vs the somewhat standard cap of 42/43% for jumbo loan DTI).  These two items combined really help increase your likelihood of getting a loan approval.
  • Normally, you need two years complete tax returns if you’re self employed. Sometimes, the underwriting software will approve a self employed individual with the need for ONLY one year most recent tax returns. Jumbo loans require two year’s tax returns (unless you have some sort of alt doc loan, but that translates into higher interest rates).
  • Conforming or conventional loans will also require less money in savings vs a jumbo loan.

Contact LifeSource Mortgage Today at [email protected] or Call   (949) 492-2252 x704

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