What is the Maximum Conventional Loan Amount?
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If you’re planning to buy a home, you may be wondering how much you can borrow. The maximum loan amount for a conventional mortgage varies by county.
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Introduction
A conventional loan is a type of mortgage that is not backed by a government entity, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). A conventional loan may be offered by a private lender, such as a bank, credit union, or mortgage company. The maximum loan amount for a conventional loan may vary depending on the lender, the size of the property, and the location of the property.
What is the maximum conventional loan amount?
The maximum conventional loan amount varies by county. Here are the conventional loan limits for 2021:
1-unit property: $548,250
2-unit property: $790,700
3-unit property: $981,700
4-unit property: $1,223,475
*These amounts are not available in all areas. Please contact your local lender for more information.
How is the maximum conventional loan amount calculated?
The maximum loan amount is generally the highest amount a lender will approve for a conventional loan. However, this number can vary from one lender to the next and also depends on the type of property you’re buying.
For a single-family home, the maximum loan amount is typically $484,350. This number is known as the conforming loan limit and is set by Fannie Mae and Freddie Mac, two government-sponsored enterprises that provide support for the mortgage industry.
If you’re looking to buy a more expensive home, you may need a jumbo loan, which has a higher maximum loan amount. The exact limit depends on the location of the property, but it’s typically around $726,525.
There are also high-cost areas where the limit is even higher. In these areas, known as nonconforming or jumbo markets, the maximum loan amount can go up to $2 million or more.
What are the factors that affect the maximum loan amount?
There are a number of factors that can affect the maximum loan amount for a conventional mortgage. These include the type of property being purchased, the borrower’s credit score, and the loan-to-value ratio.
The type of property being purchased is one of the biggest factors that will affect the maximum loan amount. A single-family home will typically have a higher loan limit than a condominium or townhouse. This is because lenders see single-family homes as less risky investments.
The borrower’s credit score is another factor that can affect the maximum loan amount. Those with higher credit scores will usually be able to qualify for larger loans than those with lower scores. This is because lenders see borrowers with high credit scores as being less likely to default on their loans.
The loan-to-value ratio is another factor that can affect the maximum loan amount. This ratio is calculated by dividing the loan amount by the value of the property. A lower ratio means that less of the purchase price will be financed by the loan, and a higher ratio means that more of the purchase price will be financed by the loan. Lenders typically like to see a loan-to-value ratio of 80% or less, which means that 20% or more of the purchase price will be paid for in cash.
Conclusion
In conclusion, the maximum conventional loan amount is $510,400. This is the highest amount that can be borrowed without having to obtain a jumbo loan. Jumbo loans have higher interest rates and stricter requirements, so they should be reserved for borrowers who need to borrow more than the maximum conventional loan amount.
