FHFA Increases 2021 Conforming Loan Limit To $548,250

BREAKING NEWS: FHFA Increases 2021 Conforming Loan Limit To $548,250 And High-Balance Ceiling To $822,375

As expected, the FHFA Increases 2021 Conforming Loan Limit To $548,250 from $510,400.

  • Fannie Mae and Freddie Mac are the two mortgage giants in the United States
  • The role of Fannie Mae and Freddie Mac is to provide liquidity in the mortgage markets
  • Fannie Mae and Freddie Mac are the two biggest mortgage buyers in the nation
  • Fannie Mae and Freddie Mac buys mortgages from banks, credit unions, mortgage bankers, and other financial institutions on the secondary market
  • Financial institutions need to sell mortgage they originate and fund so they can pay off their warehouse line of credit so they can originate and make more loans
  • This is how Fannie Mae and Freddie Mac provides liquidity in the mortgage markets
  • The announcement by the Federal Housing Finance Agency was announced today
  • The maximum baseline conforming loan limits for mortgages being purchased by both Fannie Mae and Freddie Mac will increase from $510,400 to $548,250 for 2021
  • The booming housing market is expected to get stronger for 2021
  • The FHFA has increased conforming loan limits for the past five years due to skyrocketing home prices

FHFA Increases 2021 Conforming Loan Limit To $548,250 Due To Rising Home Prices

Why FHFA Increases 2021 Conforming Loan Limit To $548,250 Due To Rising Home Prices

The Federal Housing Finance Agency (FHFA) has increased conforming loan limits for five years in a row due to rising home prices.

  • Home prices have hit a six year high
  • There are more demand for homes than inventory of housing
  • Many homebuyers are being priced out of the market due to rising home prices
  • Normally, the Federal Housing Finance Agency will announce the increase of conforming loan limits
  • HUD will follow the FHFA lead and announce the FHA loan limit increase shortly following today’s news
  • The FHFA conforming loan limit increase was expected
  • The conforming loan limit increased by 7.42% for 2021
  • The 7.42% hike by the FHFA in the conforming loan limit increase was due to the average home value increasing by that amount between the third quarters of 2019 and 2020

The increase in conforming loan limit for 2021 offers relief for homebuyers who are getting priced out of the housing market due to skyrocketing home prices.

High-Balance Ceiling Limit Increases To $822,375 In High-Cost Areas

What is the High Cap Balance Limit increases to $ 822,375 in high cost areas

The FHFA increased high-balance conforming loan limits high-cost areas like many counties in California.

  • The new ceiling conforming loan limit in high-cost areas will increase from $765,500 to $832,375 effective January 1st, 2020 on single-family homes
  • Conforming loan limits for two to four unit multi-family homes will have higher conforming loan limits than single-family homes
  • In California, there is a major shortage of housing
  • Due to the housing shortage in California, home prices in California are skyrocketing
  • California has many environmental regulations for home builders
  • There is also a land shortage on buildable land near major cities like Los Angeles, Irvine, San Francisco, and San Diego
  • The increase in the high-balance conforming loan limits will definitely help homebuyers in high-cost areas

Click on this link to look at the 2021 maximum conforming loan limits for all counties and county-equivalent areas in the U.S. here.

In its news release, the FHFA announced the following:

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

Gustan Cho Associates will honor the conforming loan limit effective immediately prior to the January 1st, 2020 effective date. The base limit will increase to $548,250 and the high balance ceiling will increase to $822,375. Gustan Cho Associates will be accepting the new loan limits for new conventional conforming and high balance locks effective immediately. HUD should follow the FHFA Conforming Loan Limit increase and should expect an announcement in the coming days. HUD is expected to increase FHA Loan Limits for 2021.

Note that these new limits impact conventional loans only. Government program loan limit changes will be announced in the future.

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