FHFA increases maximum conforming loan limit
As home prices increase, the Federal Housing Finance Agency is helping homebuyers keep pace with higher conforming loan limits. That’s the takeaway from the FHFA’s announcement on November 24th, and mirrors a similar increase by the federal agency in 2020. Starting in 2021, the baseline for single-unit home mortgages acquired by Fannie Mae and Freddie Mac will jump significantly, from $510,400 to $548,250 in most of the continental US.*
So, why the sharp increase?
The FHFA’s move is a direct response to the rising property values we’ve been seeing across the country. In their third quarter 2020 House Price Index report – also published on November 24— the FHFA estimated the average cost of a one-unit home in the U.S. increased by nearly 5.3% over the last year.* In accordance with the Housing and Economic Recovery Act, the conforming loan limit must be adjusted every year based on changes to average home prices. In addition to one-unit properties, the new limits include:
- $702,000 for 2-unit properties
- $848,500 for 3-unit properties
- $1,054,500 for 4-unit properties
Conforming loan limits are even higher in high-cost areas like Alaska, Hawaii, Guam and the Virgin Islands. While the exact number varies by county, the new baseline for a one-unit property in these parts of the country will be $822,375, with a four-unit maximum amount of $1,581,750.
So, what does this mean for me?
At the end of the day, the FHFA’s announcement will mean an expansion of credit that helps create more opportunities for people to become homeowners. A higher conforming loan limit means you can now borrow more money under the conforming loan guidelines, which are generally less stringent than non-conforming jumbo loans. Potential benefits of securing a conforming loan include:
- A better chance of qualifying for a property inspection waiver—no need to schedule an appraisal before close.
- A streamlined condo questionnaire—which makes it easier to purchase a condo.
- Less documentation—Freddie Mac loan products may require one year of tax returns instead of two.
Larger conforming loan amounts are on the horizon in 2021. Contact your local Proper Rate loan officer to find out if you qualify!
To find out the loan limit in your specific county click here: List of 2021 maximum loan limits
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Proper Rate for current rates and for more information.
Proper Rate is not affiliated with the Federal Housing Finance Authority.