FHFA Conforming Loan Limits Rise Almost $38K in 2021

Fannie Mae and Freddie Mac will accept loans up to $548,250 next year – an increase from $510,400 in 2020. According to the seasonally adjusted FHFA Home Price Index, third-quarter housing prices rose 7.42% year-to-year, so loan limits will do the same.

WASHINGTON – The Federal Housing Finance Agency (FHFA) announced the amount that maximum conforming loan limits for mortgages will go up in 2021 – from this year’s $510,400 maximum to $548,250 after Jan. 1, 2021, or an increase of $37,850.

FHFA oversees loans bought by Fannie Mae and Freddie Mac, and since many lenders sell their loans in order to maintain liquidity for even more loans, the change opens the market up to more buyers.

While the Federal Housing Administration (FHA) and Veterans Administration (VA) have not yet announced changes for 2021, they often reflect decisions made by FHFA.

The maximum amount can vary, however. In most of the U.S., the 2021 maximum conforming loan limit (CLL) for one-unit properties will be $548,250, but it’s more in high-cost housing areas, such as San Francisco.

Calculating the conforming loan limit

The U.S. Housing and Economic Recovery Act (HERA) requires adjusting the baseline conforming loan limit each year to reflect changes in the average U.S. home price.

Earlier today, FHFA published its third quarter 2020 FHFA House Price Index (HPI) report, which estimates the increase in average home values over the last four quarters. According to the data, house prices increased 7.42%, on average; as a result, the conforming loan limit for 2021 went up by the same percentage.

High-cost area limits

In areas in where local median home values are 115% higher than the baseline CLL, the maximum loan limit is also higher based on a multiple of that median value. HERA also sets a “ceiling” on that limit – 150 percent of the baseline loan limit.

The new ceiling loan limit for one-unit properties in the highest-cost areas will be $822,375 in 2021 – 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.

Questions about 2021 conforming loan limits?

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