If a buyer can’t get a mortgage, she can’t buy your house.
Three big government (Federal Housing Authority) and quasi-governmental (Fannie Mae and Freddie Mac) agencies set many of the terms for mortgages. Understanding how they work will help you price your house so that buyers can get mortgages to buy it.
Many first-time buyers rely on the government guarantee provided through FHA lending programs, which are designed to help people get into the housing market with a low down payment. But the FHA will only guarantee loans up to a certain amount. In late 2016, that amount was raised to $424,100 for most of the country and $636,150 for the most expensive cities. (Confirm the limits for your area at the FHA website. )
Similarly, the loan limits for Fannie Mae dictate the size of ‘conforming loans,’ which are the mortgages that are written by local lenders so that they will automatically be accepted by Fannie Mae. At the end of 2016, $424,100 was the maximum for most of the country for a single-family home, bumping up to $636,150 for high-cost areas. Déjà vu! That’s the same as the FHA limits! It all lines up!
Of course, a buyer can get a mortgage for more than the top amount that these agencies will approve. But doing so is a lot of work and requires a custom-crafted loan. Your house has to justify not just the price, but also the hassle.