Fannie Mae, Freddie Mac Increase Loan Limits for Almost All of U.S.

The maximum conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac is set to increase for the fifth year in a row.

The Federal Housing Finance Agency (FHFA) announced this week that it is increasing the conforming loan limit for Fannie and Freddie mortgages in nearly every county in the country for 2021.

According to the FHFA, the conforming loan limits for most of the U.S. will increase from $510,400 this year to $548,250 for 2021.

That’s a 7.42% increase over this year’s total. The increase is based on the FHFA home price index, which also showed a 7.42% increase in home prices from the third quarter of last year to the third quarter of this year.

Under the Housing and Recovery Act of 2008, the limit on the size of mortgages Fannie and Freddie can purchase is dictated by the average U.S. home price. As a result of the home price increase in the last year, the FHFA is increasing the GSE loan limit by the same percentage.

This is fifth straight year that the conforming loan limit has increased.

Loan limits will also be increasing in “high-cost” areas, which are counties where 115% of the local median home value is above the baseline loan limit amount.

Put another way, in markets where home values are well above the typical housing market (San Francisco and New York City, for example), the maximum loan amount is higher than the rest of the country.

According to the FHFA, “median home values generally increased in high-cost areas in 2020, driving up the maximum loan limits in many areas.”

As a result, the new maximum loan limit for those “high-cost” areas will be $822,375 in 2021, up from $765,600 this year. That loan limit also applies to Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

According to the FHFA, as a result of home prices rising in almost every part of the country over the last year, the loan limits are increasing for all but 18 counties next year.