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There's a maximum amount you can borrow when you get a mortgage. On a personal level, this limit will depend on your creditworthiness and how much you can comfortably spend each month.
On a larger scale, lenders are also restricted on the amount they can lend to borrowers if they wish to conform to the guidelines set by the Federal Housing Finance Agency (FHFA). Loans that meet these guidelines are referred to as conforming loans.
If you're planning to buy a property in Texas, this article will help you determine the maximum conventional mortgage you can borrow this 2023.
What is a Conventional Loan: A Texas conventional mortgage loan is a type of home mortgage that is not backed or insured by the federal government. Rather, these loans follow the guidelines set by Fannie Mae and Freddie Mac and are commonly referred to as "conforming" mortgages.
Conventional loans are generally considered to be less risky for lenders than government-backed loans, and borrowers typically need to meet stricter eligibility criteria, such as having a higher credit score and a larger down payment.
Since conventional loans conform to the standards of Fannie Mae and Freddie Mac, borrowers may be able to access more competitive interest rates and terms when applying for a conventional loan in Texas.
Before we go into details about the conventional loan limits in Texas for 2023, let's first discuss how mortgage loan limits work.
Loan limits refer to the maximum amount borrowers can receive for a mortgage loan. These limits are set by government agencies, such as the FHFA, to ensure that borrowers are not taking on more debt than they can reasonably handle. Loan limits are based on the median home prices in the local housing market and are adjusted annually.
It's important to note that loan limits only serve as a cap on the maximum amount a borrower can receive. It is not a guarantee that the lender will approve a loan for that full amount. As mentioned above, factors such as the borrower's creditworthiness and income play a major role in determining the amount of mortgage they can be eligible for.
Unlike FHA loans, conventional loans are mortgages that are not guaranteed by the government. Instead, they are offered by private lenders and are often insured by two government-sponsored entities—Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).
Conventional loan limits are set by the FHFA. And for 2023, the conventional loan limit for a single-unit property in Texas is $726,200 which is a 12.21% increase from last year's loan limits. This increase in loan limits is a good thing as it offers more buying power to potential home buyers. Additionally, knowing about these loan limits can help you determine the amount you can afford to borrow and set realistic expectations for your home purchase.
Conforming loans and conventional loans are often used interchangeably. However, they have one key distinction that sets them apart from each other.
Simply put, a conventional loan that follows the loan limit guidelines set by the FHFA is called a conforming loan. So it's safe to say that all conforming loans are conventional loans, but not all conventional loans are conforming loans.
For 2023, the baseline limits for most areas in the United States, including Texas, are as follows:
It's important to remember that these limits serve as just the standard maximums. In regions with expensive real estate markets, these conforming loan limits will be significantly higher.
Now for high-cost counties, the conforming loan limits can also go as high as the following:
Some of these high-cost areas are within California, Virginia, Colorado, the District of Columbia, Massachusetts, and New Hampshire.
A jumbo loan is a type of mortgage that exceeds the conforming loan limit set by the FHFA. While conforming mortgages can be purchased or guaranteed by Fannie Mae or Freddie Mac, jumbo loans are not eligible for such.
Jumbo loans are often used to finance luxury properties. The loan limit for a jumbo loan will all depend on the mortgage lender you're working with. In most cases, the amount you can borrow can go up to $2 or $3 million.
Since jumbo mortgages are not guaranteed by Fannie Mae or Freddie Mac, and since it involves a larger amount of money, they pose a greater risk to mortgage lenders. With that, the requirements needed to qualify for a jumbo loan are more stringent compared to conforming loans. This often includes a credit score of 700, a debt-to-income (DTI) ratio of 43% or lower, and a 10% minimum down payment.
Jumbo loans are usually appropriate for borrowers known as HENRY—high earners, not rich yet. In other words, these are the people who generate a lot of money but don't have millions of dollars in cash or other assets yet.
A conventional loan can be either conforming or non-conforming. Conforming loans follow the loan limits or guidelines set by the FHFA. On the other hand, non-conforming loans or jumbo loans go beyond these conforming loan limits.
In Texas, the baseline limit for a single-unit property is $726,200 which is a $79,000 increase from 2022's conforming loan limit. This increase means that the borrower will now have more buying power in the ever-competitive real estate market.
If you're planning on applying for a conventional loan in Texas, then Ebenezer Mortgage Solutions can help you.
Ebenezer Mortgage Solutions is a mortgage broker company based in Florida but is now also offering services in Texas. We work with multiple mortgage lenders. This means that we can get you access to better mortgage deals and options that are not available with your regular bank.
We also understand that the whole mortgage process can be overwhelming especially for first-time home buyers. That's why our services include applying for these lenders so that you don't have to. Moreover, we'll be with you from application to closing, guiding and advising you using our years of experience and knowledge. All in all, we aim to provide you with a stress-free and smooth-sailing mortgage process.
Call us today at (813) 284-4027 so we can start looking for the best mortgage option for you.
