New Government Loan Limits Are Good News for Homebuyers

New Government Loan Limits Are Good News for Homebuyers

The real estate in Baltimore, Maryland is so hot right now that some buyers waive inspections and put in offers that are well above the listing price. You need to act quickly if you want to get your dream home, but that does not mean you need to rush through the loan process!

Thanks to government programs, you have the chance to borrow money for your mortgage even if you have less than perfect credit or have credit flaws that cause other lenders to turn you down. At Derek Blazer of Cummings & Co. Realtors, we have the knowledge and skills needed to help you learn about the top government loans and what the limits are for GSE and FHA loans. Learn more below.

GSE Loans for Homebuyers

Before applying for a mortgage, you might hear about companies such as Freddie Mac and Fannie Mae. Both of those companies along with Federal Home Loan Banks (FHLB) offer government-sponsored enterprise loans (GSE). This is a type of loan needed when the government wants to raise market capital.

You can apply for a loan with a fixed rate to avoid hidden surprises in the future. These are also long-term loans that usually give you 30 years to pay them off. You can use a GSE loan to buy a single-family home or a multifamily building, but you will need to reside there to qualify. GSE loans do not work on investment properties such as a home you plan to rent to someone else.

FHA Home Loans

In addition to GSE loans, there are also FHA loans available from the Federal Housing Administration. The FHA offers flexible loans with looser restrictions. While you often need a good credit score in the 700s to get a loan from another lender, the FHA offers loans for borrowers with a score as low as 580.

If you qualify for a 30-year loan, you have the option of making a down payment you can afford. This ranges from 10% with a credit score of 580 to 3.5% with a credit score in the 600s or higher. You can even apply for one of these loans if you had a foreclosure or bankruptcy in the past.

What You Need to Apply for a Home Loan

Whether you apply for a GSE or FHA loan, you need some of the same things. You should not expect to just show your ID and get a mortgage on the spot. When you compare real estate professionals, you’ll find talented experts who can help you gather the documents you need.

The most important thing you need is proof of your income as this will determine the loan size you get. You’ll typically use pay stubs from your employer, but you can also use a letter from your company. If you are self-employed or have a nontraditional job, you might use tax returns or bank statements. These lenders also ask for proof of your credit history and a letter that shows someone else will help you with the down payment or mortgage.

FHA and GSE Loan Limits for 2022

You may find that you do not qualify for as much money as you expected, which can occur because of judgments or late payments on your credit report along with your income. The government limits the maximum amount of money that any individual or couple can borrow. The limit looks at the average national conforming limit and multiplies it by 150%. This only applies to loans in areas with a lower cost of living. As the cost of living rises, so too does the maximum amount you can borrow. Those living in the areas with the highest costs of living can borrow up to $970,800.

The government increased the maximum GSE and FHA loan limits in 2022 to keep up with the rising prices of homes sold across the country. You can use the FHA website to see what the limit is that you can borrow based on where you live or a different area if you plan to move. The government does not automatically approve you for the maximum amount if you receive approval though. Your limit will depend on how much debt you have compared to how much money you make and your overall credit history.

Other Loan Programs

At Derek Blazer of Cummings & Co. Realtors in Baltimore, we want you to know that there are other government loans that can help you buy a home such as those available from the Department of Veterans Affairs. The VA offers loans to those in the military and to those who retired from the military. You may also qualify if you were the spouse of a service member. VA loans have a fee you need to pay at closing but usually do not require that you pay for special insurance.

The U.S. Department of Agriculture (USDA) has home loans designed for those who want to buy a home in a rural community. You will need to pay mortgage insurance premiums and pay a fee at closing, but the interest rates are often lower than those associated with other GSE and FHA loans.

Government Home Loans and Interest Rates

Getting a government loan can help you save money in the long run because the interest rates are usually lower than you’ll find through traditional lenders. At Derek Blazer of Cummings & Co. Realtors, we want you to understand all your options and learn about the limits that government loans have before you apply for a mortgage. You can view all the past sales we have helped close in the locations around Baltimore to get an idea of how we can help you. Contact us when you’re ready to get an FHA or GSE loan to buy a Baltimore home.