Loan Limits Increase Nearly 7.5 Percent

The Federal Housing Finance Agency (FHFA) has released the new conforming loan limits which will be in place next year for mortgages acquired by the GSEs Fannie Mae and Freddie Mac.  In most of the U.S., the 2021 maximum conforming loan limit (CLL) for one-unit properties will be $548,250, an increase from $510,400 in 2020. 

The Housing and Economic Recovery Act (HERA) requires that the baseline CLL be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price as reported by FHFA's House Price Index (HPI).  According to the seasonally adjusted, expanded data HPI published last week, house prices increased 7.42 percent, on average, between the third quarters of 2019 and 2020.  Therefore, the baseline maximum CLL will increase by the same percentage. 

The maximum loan limit in some areas is considered high cost, that is where 115 percent of the local median home value is higher than the baseline CLL, is also established by HERA. It uses a multiple of the area median home value but sets a "ceiling" at 150 percent of the baseline loan limit.  The new ceiling loan limit for one-unit properties in most high-cost areas will be $822,375 or 150 percent of $548,250.  There are special provisions in HERA that sometimes provide different limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. However, in 2021 those areas will also have the $822,373 ceiling.  

As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, FHFA says the maximum CLL will increase for next year in all but 18 U.S counties or county equivalents. will be higher in 2021 in all but 18 counties or county equivalents in the U.S.  

A list of the 2021 maximum loan limits for areas of the U.S. and for multiple unit properties is available here.