FHFA increases maximum conforming loan limit
Next year’s housing market is shaping up to be an active one after the Federal Housing Finance Agency (FHFA) announced higher conforming loan limits on November 28. On the heels of the FHFA’s slight increase in 2016 for the first time in a decade, the baseline for single-unit home mortgages acquired by Fannie Mae and Freddie Mac will jump significantly next year, from $424,100 to $453,100 in most of the continental US.*
Why the sharp increase?
This move is a direct response to rising property values across the country. The FHFA’s third quarter House Price Index report – also published on November 28—estimated the average cost of a one-unit home in the U.S. increased by nearly 7% over the last year.** According to 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:
- $580,150 for 2-unit properties
- $701,250 for 3-unit properties
- $871,450 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 $679,650, with a maximum amount of $1,019,475.
What does this mean for me?
At the end of the day, the FHFA’s announcement will result in an expansion of credit that creates 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—this makes it easier to purchase a non-warrantable condo.
- Less documentation—Freddie Mac loan products require one year of tax returns instead of two.
Larger conforming loan amounts are on the horizon. Contact your local Guaranteed Rate Affinity loan officer to find out if you qualify!