2021 will see an increase in both the Conforming and FHA loan limits.
Increases in home prices across the U.S. have led to an increase in conforming loan limits. The Federal Housing Finance Agency (FHFA) has announced the maximum conforming loan limits (CLLs) for mortgages acquired by Fannie Mae and Freddie Mac in 2021. The 2021 conforming loan limit will increase to $548,250 for one-unit properties. This will be applicable to most of the United States and constitutes a 7.42% increase from 2020’s limit.
High-cost counties like San Francisco, CA will see the loan limit rise to $822,375 for 1-unit properties.
Single-family homes, townhomes, and condos are considered 1-unit properties.
Here is the limit breakdown by property size for both base conforming and high-cost limits:
The Federal Housing Administration (FHA) has also changed its loan limits to $356,362 and as high as $822,375 for high-cost counties. The 2021 FHA loan limits are:
FHFA’s increase in limits is in line with the trend seen over the past few years. The maximum CLL will be higher in 2021 in all but 18 counties or county-equivalents in the U.S., primarily due to rising home values and increases in baseline and ceiling loan limits. The Housing and Economic Recovery Act (HERA) stipulates that the baseline CLL must be adjusted every year for Fannie Mae and Freddie Mac to reflect changes in average U.S. home prices. Home prices increased by 7.42% between Q3 of 2019 and 2020. The baseline maximum CLL will increase by the same amount.
High-cost areas are seeing a much higher loan limit, sitting at $822,375. As median home values increased in these areas this year, maximum loan limits have ticked up, now accounting for 150% of the $548,250 limit in the rest of the country. For example, in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, special statutory provisions and their effect on loan limit calculations dictate that the baseline loan limit will be $822,375 for one-unit properties.
What do higher loan limits mean for you?
If you are a prospective homebuyer, this is great news! These new limits come as good news for those who are planning to take advantage of the historically low mortgage rates in 2021. Higher loan limits will allow borrowers to borrow up to an amount that reflects the housing market around them, thereby increasing their buying power.
This also means that first time home buyers can qualify for a 3% down payment for loan amounts up to $548,250 for Conforming loans and a 3.5% down payment for FHA loans up to $356,362 (or higher depending on the county limit). If you live in a high-cost county you can buy or refinance a much bigger loan amount without having to worry about more restrictive jumbo qualification guidelines.
For more information about your county’s maximum loan limit, visit here.