For almost a decade after the housing crash, loan limits were held tight at $417,000, but rising prices has caused the Federal Housing Finance Agency (FHFA) to reconsider. Starting January 1st 2018, loan limits for mortgages eligible to be acquired by Fannie Mae and Freddie Mac will be raised to $453,100.
- FHFA raised max conforming loan limits for GSEs to $453,100
- Veterans administration and FHA are expected to follow suit
- In areas where local median home value is more than 115% of the limit, borrowers are allowed up to 150% baseline limit
After the housing crash, there was a long period of stagnation in the max conforming loan limit eligible to be acquire by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. In the beginning of 2017, the FHFA decided to slightly raise the loan limit from its longstanding $417,000 to $424,100. As home prices continue to rise, however, the FHFA will be raising that limit again to $453,100 starting on January 1st 2018.
The conforming loan limit for GSEs is intented to be adjusted each year to reflect changing home prices, according to the Housing and Economic Recovery Act (HERA). And since the median home sale price just recently surpassed its pre-recession peak, the FHFA is finally deciding to give the limit a substantial raise.
Not every borrower, however, will be restricted to a hard cap of $453,000. If a locality‘s median home value is more than 115% of the limit, HERA allows for an increased ceiling of up to 150% (about $679,650) of the baseline limit.
The FHFA said limits could be even higher in some specific locations. Hawaii, Alaska and Guam have higher baseline loan limits of $679,650 for one-unit properties.
Fannie Mae stated that loans delivered before the new year must still comply with 2017 limits. “Loans can be submitted (or resubmitted) through Fannie’s Desktop Underwriter on or after the weekend of December 9, 2017,” according to Mortgage News Daily. “Even if loans were submitted before Dec 9th, Fannie says the new loan limits will still apply if the loan amount was the only reason the loan was deemed ineligible (assuming, of course, that the loan isn’t delivered to Fannie before 1/1/2018).”