The conforming loan limit has now increased by nearly $100,000 since 2016.
On Tuesday, the Federal Housing Finance Agency announced that it is raising the conforming loan limits for Fannie Mae and Freddie Mac to more than $548,250.
In most of the U.S., the 2021 maximum conforming loan limit will be raised to $548,250, up from 2020’s level of 510,400. 2021 is the fifth straight year that the FHFA has increased the conforming loan limits after not raising them for an entire decade from 2006 to 2016.
In 2016, the FHFA increased the Fannie and Freddie conforming loan limit for the first time in a decade, and since then, the loan limit has gone up by $93,400.
In 2016, the FHFA increased the conforming loan limits from $417,000 to $424,100. Then, the following year, the FHFA raised the loan limits from $424,100 to $453,100 for 2018. And in 2018, the FHFA increased the loan limit from $453,100 to $484,350 for 2019. 2020 saw loan limits go from $484,350 to $510,400. And now, loan limits will top out at $548,250.
The conforming loan limits for Fannie Mae and Freddie Mac are determined by the Housing and Economic Recovery Act of 2008 (HERA), which established the baseline loan limit at $548,250 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.
Data from FHFA shows that home prices have increased by 5.38% on average between the third quarter of 2018 and the third quarter of 2019. Therefore, the baseline maximum conforming loan limit in 2020 will increase by the same percentage. The increase in home prices reflects their growth in value.
For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as a multiple of the area median home value while also setting a “ceiling” on that limit of 150% of the baseline loan limit.
Median home values generally increased in high-cost areas in 2019, driving up the maximum loan limits in many of those areas.
The new ceiling loan limit for one-unit properties in most high-cost areas will be $822,375 — or 150% of $548,250.
Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $822,375 for each one-unit properties.
The result of generally rising home values, and the increase in the baseline loan limit, in addition to the rise in the ceiling loan limit, the maximum conforming loan limit will be higher in 2021 in all but 43 counties or county-equivalents in the U.S. Refer to this map of those maximum loan limits nationally.