The Federal Housing Finance Agency (FHFA) is increasing the maximum conforming loan limit for mortgages to be acquired by Fannie Mae and Freddie Mac for the first time since the housing crisis. The conforming limit will increase from $417,000 to $424,100 in 2017 for one-unit properties (or single family homes).
The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.
The FHFA noted that until this year, the average U.S. home price remained below the level achieved in the third quarter of 2007, which it designates as the pre-decline price level, and therefore the baseline loan limit had not been increased.
The increase is an indication that home prices have risen sufficiently for the government to authorize this increase. Home prices were 1.7% higher in the third quarter of 2016 than during the same period in 2007, according to the FHFA’s Home Price Index, also released on Wednesday. The increase to the baseline conforming loan limit matches that 1.7% uptick.
The baseline loan limit applies to most of the country, with the exception of high-cost areas where 115% of the local median home value exceeds the baseline loan limit. In these areas, higher loan limits apply.
For a full list of the conforming loan limits by county, click here.