Borrow Bigger in 2021 With Increased Conforming Loan Limits

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Here’s some good news for the nation’s homebuyers facing increased home prices. The Federal Housing Finance Agency (FHFA) has announced a 7.5% increase to the baseline conforming loan limit for Fannie Mae and Freddie Mac home loans financed in 2021 for nearly every county in the U.S.

As of 1 January 2021, the base conforming loan limit will increase to $548,250 for one-unit properties.

The increased loan limits may make it easier for both first-time buyers and established homeowners to buy a home. Homeowners can also refinance their current home loan up to this new loan limit.

The new ceiling loan limit for one-unit properties in most high-cost areas will be $822,375 — or 150% of $548,250. The 2021 high-cost loan limit also applies to one-unit properties purchase in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

Click here to see the new conforming loan limits for your county.

How is the conforming loan limit determined?

The conforming loan limits for Fannie Mae and Freddie Mac are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000. The Act mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. Today’s announcement marks the fifth consecutive year of increases from the FHFA.

For high-cost areas, where 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit is higher than the baseline loan limit. The Housing and Economic Recovery Act of 2008 established a maximum loan limit in those areas as a multiple of the area median home value while setting a “ceiling” on that limit of 150% of the baseline loan limit.