The Federal Housing Finance Agency has raised the conforming mortgage loan limits by 6.9 percent for 2019 to account for an ongoing rise in national home values, equivalent to the amount property values rose between the third quarters of 2017 and 2018. 

The bump, according to industry experts, could present a good opportunity for first-time homebuyers, but is less likely to have an impact in more expensive counties near major metropolitan areas like Boston. 

“In my opinion, it impacts the first-time homebuyers the most,” Shant Banosian, branch manager at Guaranteed Rate in Waltham, told Banker & Tradesman. “It opens up the ability to borrow to more consumers and more homebuyers. This will create the opportunity for homeownership for more people.”  

After a decade of stagnant conforming loan limits, the FHFA has now raised the limit in each of the last three years. 

The maximum loan amount in 2019 for a one-unit property in most counties across the country will be $484,350, a $31,250 increase from the $453,100 limit in 2018. This conforming limit, however, will be higher in counties with significantly higher median home values.  

In Middlesex, Suffolk, Norfolk, Essex and Plymouth counties the conforming limit is set at $688,850. In Nantucket and Dukes counties, the limit is $726,535. In Massachusetts’ remaining seven counties, including Worcester, Berkshire and Franklin, the limit is $484,350. 

More First-Time Homebuyers, Fewer Refinancings 

As of mid-December, lenders in Massachusetts originated more than 1,960 single-family purchase mortgages in the range between $453,100 and $484,350, according to data from The Warren Group, publisher of Banker & Tradesman.  

The new conforming limits present some potential for refinancings due to the higher loan limit, but those refi opportunities will likely be offset by the current interest rate environment, said Jay Tuli, executive vice president of residential lending at Arlington-based Leader Bank. 

“If you did a refi in the last two or three years, you probably have a lower rate than what you can get now, unless someone in an adjustable-rate mortgage is trying to refi out to a fixed rate,” he said. “If rates were to drop, what this means in the refinance environment is that a lot more can go to Fannie. But with these rates, there is not a lot of refi potential.” 

Banosian said homeowners might see opportunities to consolidate a first and second mortgage, but the bigger opportunity – although it does depend on the county – is for first-time homebuyers. A wider pool of people will qualify for conforming mortgages under the new rates. 

Conforming mortgages financed by government-sponsored entities and the FHFA are the most lenient, allowing eligible first-time homebuyers to put down as little as 3 to 5 percent in some cases. Jumbo loans, on the other hand, require borrowers to have higher FICO scores and larger down payments, and also come with asset and reserve requirements. 

“If people are paying higher rents and they have debt, that impacts how much they can save, which is a major barrier to entry to homeownership,” Banosian said. “Conforming loans allow them to get into a really competitive, fixed-rate mortgage at higher loan amount.” 

Muted Impact in Expensive Counties 

While beneficial in many counties nationwide, the higher conforming limit will not be very helpful to borrowers in and around Boston, where many lenders have focused their business efforts. 

Rising home values in Boston and other metropolitan areas have far eclipsed home values nationwide, and therefore increased conforming limits.  

Bram Berkowitz

The median home value in the U.S. rose from about $175,000 to just shy of $223,000 between December 2008 and December 2018, a roughly 27 percent increase, according to Zillow. In Boston during that same period, the median home value rose from about $334,000 to $608,000, roughly an 82 percent increase. 

As a result, many of the mortgages originated in more expensive areas like Middlesex, Suffolk and Norfolk counties qualify as high-balance mortgages. These mortgages fall between the new national conforming limit, $484,350, and the conforming limit in that particular county. 

The GSEs allow lenders to put only 10 percent of these mortgages into a securitization pool at one time. Lenders must then charge higher rates for high-balance mortgages than for conforming mortgages at or below $484,350 to equalize supply and demand, Tuli said. 

“The hope was that conforming limits would increase enough to take people out of high-balance and make them conforming, but it didn’t,” he said. “There is still that premium in the high balance area. If the conforming limit got into the mid-$500,000s, that would move a lot of people from high balance territory into conforming land.”