Published on December 11, 2018
Written by The Servion Group
For the third straight year, the Federal Housing Finance Agency is increasing the maximum conforming loan limits for loans to be sold to Fannie Mae and Freddie Mac.
According to the FHFA, the conforming loan limit for single-unit properties will rise by 6.9 percent, from $453,100 to $484,350 in most parts of the country. In high cost areas, the new limit will be $726,525 (we'll discuss below).
Conforming loan limits for Freddie Mac and Fannie Mae are determined by the Housing and Economic Recovery Act of 2008. The act established an original limit of $417,000. With home prices on the rise around the country, the FHFA had to raise the conforming loan limit.
The agency's 2018 House Price Index report, which estimates the increase in home values for the most recent four quarters, showed an average price increase of 6.9 percent, which is why the conforming loan limit for 2019 will rise by that amount.
The FHFA defines a high-cost area as a market where "115 percent of the local median home value exceeds the baseline conforming loan limit." The maximum loan limit in these areas is calculated as a multiple of the area's median home value. The "ceiling" in a high-cost area is set at 150 percent of the baseline loan limit.
The new loan limit for one-unit properties in most high-cost areas - such as New York, Los Angeles, and Washington, D.C. - will be $726,525 — or 150 percent of $484,350.
All told, the maximum conforming loan limit will be higher in all but 47 counties in the U.S.