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
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
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).