At the end of 2017, the Federal Housing Finance Agency (FHFA) announced that it would raise the baseline Arizona Conforming Loan Limit for 2018, for most counties across the country, including all counties in Arizona. The reason for the increase in conforming loan limits is related to significant home-price gains that occurred during 2017.
In Arizona counties, the 2018 maximum conforming loan limit for a single-family home will be $453,100. That’s an increase of $29,000 from the 2017 baseline limit of $424,100. Also of note, 2-unit (duplex), 3-unit (triplex) and 4-unit (fourplex) properties have increased across the board for maximum conforming loan amounts.
It is possible to secure mortgage financing above the 2018 Arizona Conforming Loan Limits. This is referred to as a “jumbo” mortgage loan. Jumbo mortgage products exceed the size restrictions set by the Federal Housing Finance Agency, and therefore cannot be sold to Fannie Mae or Freddie Mac. Lenders typically require better credit scores, larger down payments and higher income levels for borrowers seeking a jumbo loan, since there is more risk involved.
Another common solution for mortgages over $453,100 is to combine a 1st and 2nd mortgage. Depending on the specifics, completing a conforming mortgage of $453,100 and simultaneously closing a 2nd mortgage for the remaining amount over $453,100 may make sense.
Purchase Price: $600,000
1st mortgage: $453,100 (conforming loan limit)
2nd mortgage: $86,900
Down Payment: $60,000
There are several factors to evaluate when deciding the best loan program for you. In the example above, it may be best for a client to split the mortgage. Other client scenarios may dictate a Jumbo mortgage as the best option. Much of this is determined on client goals, credit score, available funds to close, and income flow. Evaluating mortgage options will vary from individual to individual and is not a “one size” fits all product.
Another solution for folks who have less than perfect credit or less money available for down payment may be an FHA loan. You can learn more about FHA Loans here.
This marks the second year in a row that federal housing officials have raised the baseline.