Homebuyers are getting some relief in 2023, thanks to the Federal Housing Finance Agency (FHFA) raising the conforming loan limits substantially.
Commonly referred to as “conventional” loans, these are mortgages that are backed by one of two government agencies, (Fannie Mae and Freddie Mac), and this typically allows for a smoother loan process and lower mortgage rates on loans that can be securitized.
The loan limit on these mortgages in 2022 was $647,200, but for 2023 this limit will be raised to $726,200. This is a significant raise of $79,000 – for reference, in 2021, the conforming loan limit was only $548,250.
What does this mean for homebuyers? Well, on Hatteras Island we just saw a recent high for median sales price of $621,250. (See the Outer Banks Association of Realtors report here). The numbers referenced in the first paragraph are actual loan amounts, so you can finance up to $726,200 in 2023 on a conventional loan. This means you can purchase a home now for up to $907,750, put 20% down, and the amount remaining will be at the cap for a conforming loan in 2023.
It also means that home prices have continued to rise, since this number is based on the average US home price.
Based on Q3 2022 vs. Q3 2021, home prices in the FHFA index were up 12.2%. For first-time homebuyers, a popular program is the FHA loan, which only requires 3.5% down versus the more common 20% down payment on a conventional loan. The limit for a 2023 FHA loan hasn’t been announced yet, but if we compare it to last year’s limit and include this year’s conforming limit hike, it should be around $520k. This opens up more options for homebuyers on Hatteras Island who have seen the median sales price go up substantially since 2020. Median sales prices on the island are up an incredible 65% in two years.
Hopefully, this will enable buyers to enjoy the typically lower mortgage rates on a conforming loan and keep pace with the continued rising home prices. Most loans being originated now should be eligible for the new 2023 loan limit increase, so it might be a good time to do a little house hunting and beat the rush!
About the Author: Stephen Smith is an Outer Banks realtor with Coldwell Banker Seaside Realty. He was recognized in 2021 as one of the top 10% of Coldwell Banker agents worldwide. He has lived on the Outer Banks for nearly 20 years, and met his lovely wife on Hatteras Island. They currently reside in Nags Head with their daughter, but Hatteras Island is still home in many ways. For questions on the Hatteras or greater OBX real estate market, you can contact Stephen directly at firstname.lastname@example.org or 252-216-9230. His website is https://www.stephensmithobx.com or you can receive his weekly newsletter by signing up at https://mailchi.mp/43cd4a4bf1a6/obxnewsletter.