Fannie Mae and Freddie Mac will now back larger mortgages for most of the U.S. With the change aimed at helping first-time buyers, the lenders will now offer as much as $424,100 - up from the previous limit of $417,000. In areas where the cost of homes has risen significantly, mortgages with a previous threshold of $625,500 will now be backed up to $636,150.
This news will be welcomed by new homebuyers, who can often only access cheaper home loans by going through government-backed mortgages. By raising the amount lenders will back, potential homeowners should have a larger inventory list to choose from. Ken Fears, director of housing finance and regional economics at the National Association of Realtors, said that it shows not just the recovering health of the housing market, but also new opportunities to expand credit.
The change comes as house prices continue to rise. In June, a record average of $247,600 was noted - this was 7.9 percent higher than the home values recorded in June 2006. After the financial crisis, prices bottomed out in 2011 at $154,600. The Federal Housing Finance Agency (FHFA) noticed a 6.1 percent increase during the third quarter for their home price index, which is used to set maximum loan amounts.
By allowing Freddie Mac and Fannie Mae to package mortgages into securities, the government can make inexpensive home loans for a 30-year fixed-rate term widely available. Now, with the higher thresholds, it is hoped that more people will be able to get a foot on the real estate ladder.