New loan limits for 2021 have recently been announced, and I’ve got some great news for hopeful Portland home buyers!
Right now (it’s December of 2020), conforming loans for the Portland area is at $510,400. (It is the same for much of the U.S., but not everywhere… it is determined by county). Starting January 1, 2021, Portland’s new conforming loan limit will be at $548,250.
In case you’re not familiar with all of this loan talk (no shame!), here’s some quick info on what a conforming loan is: Every year the Federal Housing Finance Agency (FHFA) sets a conforming loan limit. A conforming loan limit is the $$$ amount of a mortgage that the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) will guarantee. Anyway, there are a lot of details that go into all of this (you can read more about conforming loan definition + limits if you are so inclined), but the TL;DR answer is this:
The change in loan limits means that home buyers now have more buying power!
I’ve worked with many clients where the $510,400 loan limit has been a frustrating roadblock to being *so close* to getting a home in Portland that would be MUCH better for them and their family situation. The increase of $38,000 to the loan amount is a HUGE DEAL—this significantly increases your house potential while only minimally increasing your monthly mortgage payment (more on that in a second).
Let’s take a moment and break down the numbers.
***And before we dive in, do keep in mind that there are MANY factors that go into this… this is just an example. Everyone’s situation is unique!!***
Buying a home in 2020 with current loan limit of $510,400:
- Say you need to put 5% down on a home, and you have $25,500 in downpayment money saved up. This can get you a house for $537,260.
- $26,860 down payment + $510,400 loan = $537,260. house price.
- If your interest rate is 2.9% and you factor in average homeowner’s insurance, property tax, etc., you can estimate that you’ll have around a $2,676 monthly mortgage payment.
Buying a home in 2021 with NEW loan limit of $548,250:
- With the new loan limit, let’s say you still need to put 5% down on a home, and you have $27,412 saved up. With a loan of $548,250 (the new limit), you can get a house for $577,100
- $28,850 down payment + $548,250 = $577,100 house price.
- If your interest rate is 2.9% and you factor in average homeowner’s insurance, property tax, etc., you can estimate that you’ll have around a $2,731 monthly mortgage payment.
That’s a monthly mortgage that’s $2,676 (in 2020) vs. $2,731 (in 2021). That’s a difference of having $1,912 more for your down payment and paying $55/month more for $38,000 more in house. That’s a big deal!
All that being said, Portland is the most affordable West Coast city.
I frequently work with clients who are moving to Portland from places like Seattle, San Francisco, and Brooklyn. Their buying power drastically increases here in Portland, OR. In case you’re curious, check out these other blog posts for more info on what it’s like to move to Portland from various cities: