New Conforming Loan Limit of $548, 250
for Conventional Loans in 2021
The Federal Housing Finance Agency (FHFA) announced in November 2019 that the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2020 would be raised again to $548,250, effective January 1, 2020.
- The average increase for the House price Index rose nearly 5.3% for the year which is the reason for the increase over the 2020 loan limits. In most of the U.S., the 2021 maximum conforming loan limit for one-unit properties will be $548,250 an increase of $37,850 from $510,400 in 2020.
The FHFA’s move is a direct response to the rising property values we’ve been seeing across the country. In their third quarter 2020 House Price Index report – also published on November 24— the FHFA estimated the average cost of a one-unit home in the U.S. increased by nearly 5.3% over the last year.* In accordance with the Housing and Economic Recovery Act, the conforming loan limit must be adjusted every year based on changes to average home prices. In addition to one-unit properties, the new limits include:
- $702,000 for 2-unit properties
- $848,500 for 3-unit properties
- $1,054,500 for 4-unit properties
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. Back in 2016, the FHFA increased the conforming loan limits from $417,000 to $424,100. Then, in 2018, the FHFA raised the loan limits from $424,100 to $453,100, then again to $484,350 in 2019. 2021’s new limit will be $548,250.
Fannie and Freddie have set underwriting rules that conforming loans must adhere to including credit and income requirements. These are also referred to as conventional loans and are under the limit of jumbo loan amounts.
They are considered lower risk and after closing the loans are sold to investors on the secondary market. As a result, mortgages with conforming loan amounts tend to carry lower mortgage rates than jumbo loans which are above the conforming loan limit.