The Federal Housing Finance Agency announced a new baseline conforming loan limit for Fannie Mae and Freddie Mac in 2021: $548,250.
This is a 7.5% increase from 2020’s limit of $510,400 and marks the fifth consecutive year of increases from the FHFA. In 2016, the FHFA increased the Fannie and Freddie conforming loan limits for the first time in 10 years, and since then, the loan limit has gone up by $131,250.
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.
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. HERA establishes the 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.
Median home values generally increased in high-cost areas in 2020, driving up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas will be $822,375 — or 150% of $548,250.
Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $822,375 for one-unit properties.
These increases in the baseline loan limit and the ceiling loan limit will drive the maximum 2021 conforming loan limits higher in all but 18 counties or county equivalents in the U.S.
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