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FHFA Increases Conforming Loan Limits

The Federal Housing Finance Agency (FHFA) will increase the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2017.  In most of the country, the 2017 maximum loan limit for one-unit properties will be $424,100, an increase from $417,000.  This will be the first increase in the baseline loan limit since 2006.  In higher-cost areas, higher loan limits will be in effect. 

The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit of $417,000 and requires this limit to be adjusted each year to reflect the changes in the national average home price.  However, after a period of declining home prices, HERA also made clear that the baseline loan limit could not rise again until the average U.S. home price returned to its pre-decline level.  Until this year, the average U.S. home price remained below the level achieved in the third quarter of 2007 and thus the baseline loan limit had not been increased. 

This week, the FHFA published its third quarter 2016 House Price Index (HPI), which makes clear that average home prices are now above their level in the third quarter of 2007. This initiated the increase in limits.

High-cost areas

In areas where 115 percent of the local median home value exceeds the baseline loan limit, the maximum area loan limit will be higher.  HERA sets the maximum loan limit as a function of the area median home value, while setting a "ceiling" on that limit of 150 percent of the baseline loan limit. 

This year, median home values generally rose in high-cost areas.  Because the baseline loan limit will be higher in 2017, the new ceiling limit will also be higher.  The new ceiling loan limit, which applies in areas with the most expensive homes, will be $636,150 (150 percent of $424,100) for one-unit properties in the contiguous U.S.    

For a complete list of the conforming loan limits, please click here.