In 2016, Seattle mortgage shoppers will have an additional $23,000 of price range before they hit any loan limits. At the end of 2015, the Federal Housing Finance Agency (FHFA) announced it would increase the conforming loan limit for Seattle. In 2016, the new loan limit for single-family homes is $540,500. This applies to FHA and VA loans as well.
Seattle Gets Higher Conforming Loan Limits in 2016
A conforming loan is one that can be sold to the government-sponsored enterprises Fannie Mae and Freddie Mac, via the secondary mortgage market. Fannie and Freddie can only purchase loans up to a certain amount. This maximum amount is referred to as the conforming loan limit.
These limits vary by county. They get reviewed every year and are sometimes increased from one year to the next, in response to rising home prices.
The conforming loan limit for Seattle was increased for 2016. In 2015, the maximum size for a conforming single-family home loan was $517,500. In 2016, the single-family cap was raised to $540,500. That’s a one-year increase of $23,000.
According to the Federal Housing Finance Agency: “the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2016 will remain at existing levels, except in 39 high-cost counties where they will increase.”
King, Pierce and Snohomish counties were among the 39 counties where loan limits were increased. That means the increase will affect most cities and towns within the Seattle metro area.
One of Only Eight U.S. Metros With an Increase
As mentioned above, loan limits were increased in only 39 counties across the country. These counties are spread over eight or nine metropolitan areas, including Boston, Denver, Nashville, San Diego and Seattle.
All of these housing markets have something in common. Home prices within these metro areas rose significantly in 2015. That’s what prompted the FHFA to increase the 2016 loan limits for Seattle and the other high-cost areas.
FHA and VA Limits Were Also Raised
Seattle FHA loan limits were also increased for 2016, and they match the conforming caps stated above. The same goes for Veterans Administration (VA) home loans. All single-family loan limits in Seattle are now set at $540,500, through the end of 2016.
Borrowers who need financing in excess of $540,500 still have options. It’s called a jumbo loan. This is a mortgage product that exceeds the conforming caps shown above. But buyer beware — lenders are a bit more picky when it comes to jumbo loans. They tend to require more money down and higher credit scores.
Rising Home Prices Are the Reason
The Seattle loan limits for 2016 were increased in response to rising home prices. According to the real estate information company Zillow, home prices in the Seattle area rose by double digits last year. The Zillow Home Value Index (ZHVI) for the city rose by 12.8% over the last 12 months. The ZHVI for the broader metro area rose by 9% in the last year.
The S&P/Case-Shiller Home Price Index for Seattle rose by nearly 9% from October 2014 to October 2015 (the most recent data available at press time). So no matter which source you look at, the trend is the same. Seattle home prices rose sharply over the last year.
This is why the Federal Housing Finance Agency raised Seattle’s loan limits. In short, buyers are having to pay more for homes these days. So they need access to larger loans without bumping into the caps.