New Conforming Loan Limits for Conventional Loans in 2020
Plus Increases in FHA LIMITS
UPDATED: 2022 CONFORMING LIMIT UPDATE: Read More Here for updated 2022 Limits
- The 2022 maximum conforming loan limit for one-unit properties will be $647,200 an increase of $98,950 from $548,250 in 2021 for most areas of the US. The average increase for the House price Index rose nearly 18.04% for the year which is the reason for the increase over the 2021 loan limits. Some areas of the US have higher limits.
2020 Conforming Limit Article:
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 $510,400, effective January 1, 2020. FHA Loan limits also increased – see below.
- The average increase for the House price Index rose 5.38% for the year which is the reason for the increase over the 2019 loan limits. In most of the U.S., the 2019 maximum conforming loan limit for one-unit properties will be $510,400, an increase from $484,350 in 2019.
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 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.
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Conforming Loan Requirements
* the loan amount must be at or below the conforming loan limit
* there is a minimum credit score requirement generally of 620 FICO
* the loan must meet qualifying guidelines set by Fannie Mae or Freddie Mac
* there are other underwriting criteria as well
* these limits apply to 1 to 4 unit residential properties
The conforming loan limit can change annually, as determined by the FHFA, based on any changes to the October-to-October Home Price Index report. This report includes estimates for the increase in the average U.S. home value over the last four quarters, and showed that home prices increased 5.38%, on average, between the third quarters of 2018 and 2019. It is announced in November and goes into effect on January 1st.
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 and then again to $484,350 in 2019.
Now for 2020, the FHFA has increased the loan limit again to $510,400.
Conforming Limits Apply to 1 to 4 Unit Residential Properties:
One-unit properties: $510,400
Two-unit properties: $653,550
Three-unit properties: $789,950
Four-unit properties: $981,700
These residential property limits generally apply to the continental US states and all the counties in Southeast Florida and the Treasure Coast (except Monroe County – see below) – Miami-Dade, Broward, Palm Beach, Martin, St Lucie, Okeechobee, Indian River and Brevard Counties.
There are a few counties in the US that have “high cost areas”, where 115% of the local median home value exceeds the baseline loan limits. Here is a link to a national map showing all counties and their loan limits for a 1 – unit home in case you are interested for any other parts of the country.
There is only in Florida and that is Monroe County and includes the Florida Keys and the lowest southwest section of Florida west of Miami-Dade county.
Monroe’s limits are: $552,000, $706,650, $854,200, $1,061,550
For one-unit properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the conforming loan limit is $765,600 – up from $726,525 in 2019, which is 50% higher than the baseline.
FHA Also Increases 2020 Loan Limits
FHA’s also establishes loan limits for low-cost and high-cost areas It establishes a “floor” for low-cost areas, which it defines as counties where the median home price is 65 percent or less of the Federal Housing Finance Agency’s (FHFA) conforming loan limit. Nationally, the low-cost limit or floor will increase to $331,760 in 2020 from $314,827 in 2019. However, per the summary below, the South Florida and Treasure Coast Counties are higher.
Changes were made to the definition of certain Metropolitan Statistical Areas by the Office of Management and Budget, so 11 jurisdictions will see a loan limit decrease from 2019 to 2020. FHA has published separate pages listing those counties with loan limit increases and decreases, as well as a County Search Page allowing users to search for loan limits by county.
FHA Loan Limits Variations by South Florida and Treasure Coast Counties
St Lucie County – $350,750 in 2020, up from 327,750 in 2019, an increase of 7%
Martin County – $350,750 in 2020, up from 327,750 in 2019, an increase of 7%
Okeechobee, Indian River and Brevard Counties – $331,760 in 2020, up from $314,827 in 2019, an increase of 5%
Palm Beach, Broward, Miami-Dade Counties – $373,750 in 2020, up from $356,500 in 2019, an increase of 5%. These figures are based on the Metropolitan Statistical Area of “Miami-Fort Lauderdale-West Palm Beach, FL” vs. by county.
Monroe County / Key West – $552,000 in 2020, up from $529,000 in 2019, an increase of 4%.
Similarly, FHA also establishes a maximum loan limit for high-cost areas, where the median home price reaches or exceeds 150 percent of the conforming loan limit. The high-cost loan limit will increase to $765,600 from $726,525. The loan limits for Alaska, Hawaii, Guam, and the Virgin Islands are set at $1,148,400 to reflect high construction costs.
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