2021 FHFA Loan Limit Increases

Market Update: The FHFA Announces That Loan Limits Increase Again

Once again, the Federal Housing Finance Agency (FHFA) has announced that they are increasing the conforming loan limits for Fannie Mae and Freddie Mac in 2021. It will be increased to $548,250. With these limit increases, homebuyers may qualify for more than in previous years!
This is the fifth year in a row that the FHFA has increased the maximum loan limits as a direct result of the average home prices increasing around the country. In 2019, the FHFA increased the loan limits from $484,350 to $510,400 for 2020.

Who is Fannie Mae and Freddie Mac?

The FHFA oversees Fannie Mae and Freddie Mac, which were created by Congress to perform important functions on the government's behalf to provide liquidity, stability, and affordability to the mortgage market. They don’t issue mortgages themselves, but they do purchase about half of all loans that mortgage lenders make and set the standards homebuyers must meet to qualify for a conforming home loan.

What is a Conforming Home Loan?

A conforming loan, or conventional loan, is a mortgage that is equal to or less than the maximum loan amount established by the FHFA. Fannie and Freddie create standardized guidelines and criteria to which mortgages must ‘conform’, including credit score and down payment requirements.
For homebuyers who meet the guidelines, these conforming loans might be beneficial to them because they typically have lower interest rates and more flexible qualifying criteria than Jumbo Loans, or non-conforming loans.

High-Cost Areas

The new ceiling in high-cost areas will be $822,375, which is 150% of the baseline loan amount of $548,250. A high-cost area is where 115% of the local median home value exceed the baseline conforming loan limits. The Housing and Economic Recovery Act of 2008 (HERA) establishes the maximum loan limits in those areas.
Basically, HERA recognizes that certain counties have much higher home values, and the typical conforming loan limit would not work there. You can view a map of loan limits by county here.
If you have any questions about how this change to the maximum conforming loan limits may affect you, we are happy to help answer your questions. A home is one of the biggest purchases of your life, and you deserve a knowledgeable advisor you can trust. Find a local Loan Officer here to get started.
- Nov 25, 2020