Loan limits were frozen in place at $417,000 for 10 long years after the housing bust, but were finally raised on January 1 of this year. Rapidly increasing home prices have now allowed the Federal Housing Finance Agency (FHFA) to increase them again for 2018.
The maximum conforming loan limits for mortgages eligible to be acquired by Fannie Mae and Freddie Mac (the GSEs) in most of the U.S. starting on January 1 will be $453,100, an increase from $424,100 in 2017. The Veterans Administration and FHA are expected to follow suit, raising limits for their own loans.
The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit for the GSEs be adjusted each year to reflect the change in the average U.S. home price. FHFA published its third quarter House Price Index (HPI) earlier today showing the average U.S. home value has increased by 6.8 percent since the third quarter of 2016. Therefore, the baseline maximum conforming loan limit has been increased by 6.8 percent as well.
Not every borrower will be subject to the baseline limit. Where the local median home value is more than 115 percent of that limit, HERA allows higher limits, with a ceiling of 150 percent of the baseline limit. This will make the new ceiling in high-cost areas $679,650, that is 150 percent of $453,100. Some areas will have limits falling between those two numbers, as shown in the heat map below and in a complete county-by-county list of loan limits here.
There are additional provisions allowing for different limits in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $679,650 for one-unit properties, but FHFA says some specific locations may have even higher limits.
Properties with multiple units will have baseline limits of $580,150 for two-family properties, $701,250 for three units, and $871,450 for four units. High cost areas will have maximum limits of $870,225, $1,051,875, and $1,307,175 respectively.
Second mortgage loan limits have been raised to $225,550 with a limit of $339,825 in Alaska, Guam, Hawaii and the Virgin Islands.
Fannie Mae has advised its sellers that loans delivered through December 31 must comply with the 2017 limits, but any loan delivered on 1/1/2018 or later gets the new limits. Loans can be submitted (or resubmitted) through Fannie's Desktop Underwriter on or after the weekend of December 9, 2017. 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).