When someone is looking to purchase a house, one of the biggest steps will be securing a loan from a licensed creditor such as a bank or credit union. Because most people cannot afford to purchase a home in cash, this is typically the biggest hurdle.
There are a number of factors that are going to determine the size of the loan for which someone can qualify. It is important for everyone to know about the factors involved in the loan limit and the various options available for a mortgage.
The Factors Involved in the Size of the Loan
When someone applies for a mortgage, the lender is going to have to decide how big of a loan a person can qualify for. Some of the factors that might be involved in this decision include:
- How much cash the person as available
- The other financial assets that someone might have access to, including investments, other properties, and vehicles
- The amount of debt that someone already has, including car payments, student loan debt, and credit card debt
- Someone’s credit score, which indicates someone’s likelihood that they are going to repay the loan
- The size of the down payment that person can afford
- The borrower’s employment history and current monthly income
All of these factors are going to impact the size of the loan that the lender is willing to provide. Ultimately, the applicant needs this loan to purchase the house, so it is important to take steps to improve someone’s financial status before applying.
Fannie Mae and Freddie Mac Homepath Loan Limits Have Increased
When these loans were introduced, there was a limit placed on the size of the loan. The good news is that the limits on these loans have been increased.
In 2019, the limit on these loans was around $484,000. Now, that limit has been raised by more than $25,000 to more than $510,000. This means that people will be able to apply for a larger loan this year through this program than they could last year.
Every year, the limits on these loans are adjusted to match the changes in the average prices of homes throughout the United States.
Compared to the prior year, the average price of a home went up by more than 5 percent. Therefore, in order for people to afford a home, the limits on home loans need to increase to match the change in price. For this reason, the loan limits have gone up.
It is important to note that the limits for those living in Hawaii, Alaska, Guam, and the United States Virgin Islands will be higher. Property is more expensive in these areas.
The Process of Applying for a Home Loan
When someone applies for a home loan, it is important to put the best foot forward possible. This will ensure that someone has maximized their chances of receiving a mortgage offer from the lender. Fortunately, there are professionals who can guide someone through this process.