The Federal Housing Finance Administration (FHFA) today announced increased conforming loan limits for 2021. The increase to $548,250 is up 7.5% from the previous limit of $510,400 set for 2020.
This increase offers expanded real estate power for Americans by allowing them to purchase more home without having to venture into jumbo loan territory (which often carries higher interest rates and stricter qualifying factors) and also improves refinance opportunities for some homeowners.
The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.
For high-cost areas, where 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit is 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 setting a “ceiling” on that limit of 150% of the baseline loan limit.
Median home values generally increased in high-cost areas in 2020, driving up the maximum loan limits in many 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 one-unit properties.
These increases in the baseline loan limit and the ceiling loan limit will drive the maximum 2021 conforming loan limits higher in all but 18 counties or county-equivalents in the U.S.
Click here to see a map of the new conforming loan limits across the U.S. (Housingwire)
What does this mean for homebuyers?
These loan limits are important for home buyers as they accommodate for the rise in home prices. This allows the homebuyer to borrow more to the limit of conforming loans.
Use our interactive calculators to discover your home financing potential.
By Geneva Financial