THE MORTGAGE BROTHERS SHOW
Conventional loan limit in Arizona has just been increased to $510,400
In Arizona and most of the USA the 2020 conventional loan limits have been increased from $484,350 to $510,400. Listen to our podcast to learn why this is great news for Arizona buyers and sellers.
*The following transcript has been edited for clarity.
Eddie Knoell — I’m Eddie Knoell.
Tom Knoell — And I’m Tom Knoell.
Eddie — We’re the Mortgage Brother Team, everyone and welcome to our show. Yes, today we have exciting news for all of us who live in Maricopa County, actually in the state of Arizona, there has been a conventional loan limit increase and so Tom, tell us what is it?
Tom — That’s right. Okay. Conventional, well we have a couple of different loan products out there, as our listeners probably know, the biggest product is going to be probably the conventional product. That’s going to be your conforming limit, the loan that most underwriters underwrite to and give you the best pricing. Besides that, you’ve got FHA, VA, and then you have some of the other products. So right now this is kind of our top tier, best priced, best loan out there. Go to the conventional/conforming limit loan. And that’s what we just got news on that it increased, and it increased to $510,400 so that’s a really, really big deal.
Eddie — Yeah, that’s amazing. Did you know that just four years ago that limit was $380,000?
Tom — Holy cow. As compared to what it was last year at $484,350, so it was about a $26,000 jump from what it was before, and you and I were talking, well what exactly does that loan limit mean? We’re so used to borrowers asking, “What do I qualify for, and what’s my down payment?” That I was thinking that the question right next to, what’s my down payment, is what’s my loan amount?
And the reason why the question what’s my loan amount is so important is because if it doesn’t fall within the conforming limit it turns into a jumbo loan or it turns into a first and second combo loan. So what you really need to be asking is what do I qualify for? What’s my down payment? And, is my loan limit under the limit? That’s a really big question. But no borrowers ask it, which is fine because you’re not really supposed to know how to ask that question. It’s up to the loan officer like you and I would tell them, “Oh, you qualify for this amount, congratulations, you make a lot of money, but you’re not in a conventional loan limit anymore, you’re in a jumbo.” You know? That’s how it’s usually introduced. So it’s a really, really big deal.
Eddie — Yes. So anything that’s above now, $510,000… So it’s $510,400?
Tom — That’s right.
Eddie — Let’s just round it to 510, anything over $510,000 is a jumbo loan. And folks, you don’t want a jumbo loan if you can avoid it. You don’t want to have a jumbo loan that’s $520,000 or 550, 600, heck, if you’re going to get a jumbo loan, you got to make it worth it, because those loans are more… They’re higher interest rates, strict guidelines, so we love this announcement that the conventional loan is now 510. People who are looking at those homes, and there’s a lot of homes out there in Maricopa County, that are in that 550 to $700,000 range can use this conventional loan. And so yeah, we’re excited.
Tom — Yeah. So, what that means is we had a couple of different areas that this would affect, number one, purchasing power. What does that do to the purchase price of your home? And it goes Ed, and I think it went from about a $509,000 up to, what was it, $537,000, 538, something like that?
Eddie — What did?
Tom — The actual purchase price of the house, so if we were to utilize the new loan limit and apply the 5% down payment –
Eddie — Yeah, then you could buy a home at $537,000 –
Tom — Right, yes so that –
Eddie — With 5% down and you’d have a conventional loan. That’s a lot of house.
Tom — So last month the purchase price that you would have maxed out at, assuming you only had 5% down, was about $509,000.
Eddie — Oh, I see what you’re saying, right.
Tom — Today that new purchase price is $537,000.
Eddie — Yeah.
Tom — And what I would argue is that it’s going to have a trickle-down effect, even though this loan amount affects higher-income earners, which is not a huge percentage of loan volume, but it’s still a decent amount of volume. It impacts all those ripple effect homes downstream or upstream, whatever the case would be. Because someone that wasn’t willing to move forward on a non-jumbo loan a month ago now can move forward on that loan, but it would be a non-jumbo. So he moves out of his house, which frees up the ability for him to sell his house, which just has that trickle-down effect.
Eddie — Yeah, the dominoes just start falling down. And really it frees up, everyone now has their asset that they can sell, there’s more financing.
Tom — Correct.
Eddie — And to buy a house for $510,000, so on the old limit you could put 5% down, on a home up to $509,000, that you said?
Tom — Mm-hmm.
Eddie — Now it’s going to 537 and for 5% down and still be in a conventional loan limit, it’s great.
Tom — Yeah. So then there were three different areas that I think you and I talked about where this impacted. So it was the purchasing power, which we just talked about, it was the “I’m in a jumbo loan, or I’m in a first and second loan, can I refi?” Where all of a sudden it’s like, “Yes, you can actually refi out of that jumbo loan, and we can finally get you out of that first and second mortgage. Where you got a little second mortgage of about 20,000, get rid of that thing.”
So that’s a big deal. And then cash out. The new cash out loan limits, used to be $484,350 are now $510,000, $510,400. So if your home appraises, not many people fall in this category, but if your home appraises for in that mid 600 range, the cash out loan devalue at 80% would get you close to it, not close, it would get you that 510,000 so that’s a big deal on those three different fronts. Purchasing power, refinancing out of a jumbo loan or a first and second, and just being able to get more money out of your house on a cash out. I was going to actually say, I was going to give a little tiny example that I think you were going to talk about some multi-unit?
Eddie — Mm-hmm.
Tom — Okay. So for just giggles, I was just looking at this, and I literally have a couple of borrowers that fall into this category where they have the old conforming loan limit first, 484, and then they had like a $20,000 second because they needed a loan of about 500 or $510,000. And there was no way that I could get them into a non-jumbo product or a non-first and second, so we had to do that. So now when I get a borrower like that that comes along, that falls in that same category, I was going to analyze if that same borrower a month ago versus today. And you would save about $40 a month because of not having to go jumbo or not having to go first and second, which is a big deal, $40 to $45 a month, and over the life of the loan, you’d save $15,000.
Eddie — Yeah, that’s cool.
Tom — We’re probably making a big deal out of this, but I really do think that it’s a big deal. So I want to throw that out. And I think you wanted to cover a couple of the multi-units.
Eddie — Yeah, just we always think about our single-family residence homes, but conventional financing has loan limits for not only the single-family residence, but a duplex, a triplex, and a fourplex. Did you know, this is kind of a fun fact, you can buy a fourplex, a $1.2 million fourplex and get a conventional loan on it?
Tom — Whoa them, what was that number, 1.2?
Eddie — $1.2 million fourplex and get a conventional loan limit.
Tom — You don’t have to go commercial for that much money?
Eddie — Yes, that’s right. And it’s not even a jumbo loan, it’s a fourplex. Now, I will say the caveat is you have to put 25% down on three and fourplexes but the loan limit is up to $981,000, so the point is you can buy something at 1.2 million, put 25% down, occupy one of the units. That’s nice.
Tom — That’s pretty awesome, that’s actually unbelievable when you said that, 1.2 million for a fourplex. Awesome. Okay, so this is a big deal. If anyone has any questions on how this affects the potential refinance or purchase on your end we’d be glad to help you. And then also just give you a little bit of a teaser, there will be, there should be announcements from FHA and VA on different loan limits that we’ll share with you in the future.
Eddie — Yes, we would expect those to come down the pipe here soon.
Tom — Awesome. All right. Anything else?
Eddie — That’s it. I think we’re good.
Tom — Okay. All right folks.
Eddie — Everyone have a good day, good week.
Tom — All right. Take care. Let’s call it a day.
Eddie — Hey guys, thanks for listening to the Mortgage Brothers Show. Please let us know if you have any questions you’d like us to answer on this podcast. You can email your questions, to Tom at firstname.lastname@example.org, or yours truly at email@example.com and be sure to ask us for a free quote on your next mortgage. Tom and I will personally work with you and help you through the whole process.
Signature home loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisor before engaging in any transaction. Signature Home Loans, NMLS, 1007154, NMLS number 210917 and 1618695, equal housing lender.