This article provides information regarding jumbo loans in Austin, Texas and includes the current conforming and jumbo loan limits for Austin in 2020.
At a glance: The current jumbo loan threshold for Austin, Texas in 2020 is $510,400. That figure represents the maximum size for a conforming mortgage loan in Austin. If you borrow more than that, it’s considered a jumbo loan and may be subject to stricter qualification criteria.
Austin, Texas Jumbo Loan Overview
When it comes to the amount of money you are borrowing, a mortgage loan can fall into one of two main categories. It can be a conforming loan, which means that it meets certain predetermined size restrictions imposed by the government. Or it can be a jumbo loan that exceeds those limits.
The “limits” we are talking about here are the conforming loan limits established by the Federal Housing Finance Administration, or FHFA. The FHFA establishes size limits for loans that are sold to Fannie Mae and Freddie Mac. (Fannie and Freddie are the two government-sponsored organizations that purchase loans from lenders through the secondary mortgage market.)
Here’s the primary difference between these categories:
- Conforming: As its name suggests, a conforming loan in Austin, Texas is one that meets or “conforms” to the size restrictions used by Fannie Mae and Freddie Mac. A conforming loan can be sold to those organizations, via the secondary mortgage market.
- Jumbo: On the other hand, we have a jumbo loan. This mortgage product exceeds the conforming limits established by federal housing officials. Because of the larger size, jumbo loans in Austin, Texas often have stricter qualification criteria for borrowers. This might include a higher credit score and a larger down payment, among other things.
As mentioned earlier, the conforming loan limit for Austin, Texas is currently $510,400. That’s the same limit for the entire state of Texas. Some states have limits that vary from one county to the next, based on median home values. But Texas is one of those states where the conforming / jumbo threshold is the same for all counties.
The bottom line here is that if you borrow more than $510,400 on a conventional loan in Austin, Texas, you have entered jumbo mortgage territory and could encounter stricter qualification requirements.
Don’t Let the Mortgage Lingo Confuse You
The language here can be a bit confusing, especially if you’re new to the subject. People often use the term Austin “jumbo loan limit.” But the truth is there is no single or standardized limit for jumbo loans in Austin, Texas.
There is a single and standardized limit for conforming loans, as explained earlier. It comes from the Federal Housing Finance Agency. But the limit for a jumbo loan in Austin can vary from one mortgage company or bank to the next.
Some lenders might put a cap around $1 million for borrowers seeking a high-end mortgage. Other lenders may go higher than that. In fact, Sprout Mortgage recently announced they are introducing a new jumbo loan product of up to $3 million, for qualified borrowers. It varies.
We tend to use the term jumbo loan “threshold” for this very reason. The conforming loan limit basically represents the line where you cross over from mortgage category to another, based on size. For the rest of this article, we will use the “threshold” term. Just keep this distinction in mind.
How This Limit Compares to Home Prices in the Area
As of June 2020, the median home price in Austin, Texas was around $415,000. The median is the midpoint for the market. This means half of all homes in the area were priced above $415,000 in June 2020, while the other half were priced below that level.
So, a median-priced home in Austin falls below the conforming loan limit for the area. That’s why Austin has the minimum or baseline conforming limit of $510,004.
In pricier real estate markets, like New York and San Francisco, loan limits can be well above $700,000. But that range is not warranted for Austin, Texas due to the comparatively lower cost of housing in the area.
According to Zillow, the median home price in Austin rose by about 5.4% over the past year (as of early summer 2020). House values in the area could actually continue to climb through the second half of 2020, despite the coronavirus situation and economic downturn. Home prices in Austin have weathered previous economic storms in the past, and they are well poised to do so again.
The Austin, Texas real estate market is currently being fueled by significant population growth. The city’s population grew by more than 20% from 2010 to 2019, according to the Census Bureau.
Meanwhile, the local real estate market is experiencing a severe inventory shortage. There just aren’t enough homes for sale to satisfy the demand from buyers. As a result of these trends, the Austin area could see additional home-price gains in 2020.
All of which begs the question: Will the jumbo loan threshold for Austin, Texas rise in 2021?
Will the Jumbo Loan Threshold Rise In 2021?
Conforming loan limits are reviewed annually in relation to local home prices. Often, these limits are increased from one year to the next to keep up with rising home values.
But that doesn’t mean the jumbo loan threshold for Austin will increase in 2021. We do not expect home prices in the area to rise enough to warrant an increase in conforming loan limits from 2020 to 2021.
We cannot predict the future. But at this point, it seems likely that the current conforming loan limit and jumbo threshold for Austin, Texas will simply carry over into 2021, without any changes or revisions.