For the first time in a decade, the Federal Housing Finance Agency announced that it will raise the maximum conforming loan limits for mortgages purchased through Fannie Mae and Freddie Mac. Beginning in 2017, the maximum loan limit for one-unit properties will be $424,100, up from $417,000, in most markets throughout the United States. Higher limits will be in effect in higher-cost areas.
Conforming loan limits set the bar for what Fannie Mae and Freddie Mac are willing to purchase in the secondary mortgage market. Anything above that threshold is considered a “jumbo” loan, a moniker that can be accompanied by higher fees for certain borrowers, higher downpayment requirements and stricter lending standards.
An increase in conforming loan limits also has a potential impact on Federal Housing Administration borrowers, as FHA sets its minimum national loan limit “floor” at 65 percent of the conforming loan limit. Any increase in FHFA’s conforming loan limit will have a corresponding effect on FHA’s loan limits as well.
National Association of Realtors® President William E. Brown noted that although the increase is relatively small, the change is a welcome step forward for potential buyers.
“Today’s conforming loan limit increase is a much-needed recognition of rising home prices in high-cost markets, and a help to first-time and lower-income borrowers looking to utilize an FHA mortgage,” said President William E. Brown, a Realtor® from Alamo, California and founder of Investment Properties. “Credit remains tight, but this decision will help more qualified buyers address the hurdles and high costs standing between them and the dream of homeownership.”
According to NAR data, home prices hit a fresh peak this summer when the median sales price hit $247,600. That high-water mark is reflective of a broader trend, as just-released existing-home sales data from NAR showed that October or 2016 marked the 56th consecutive month of year-over-year gains.
FHFA last announced a conforming loan limit increase in 2006.