Last year, the Federal Housing Finance Agency increased the maximum conforming loan limits for mortgages. This affected mortgages acquired by Fannie Mae and Freddie Mac.  This was the first increase to the maximum conforming loan limits since the housing crisis began in 2006.  And now, the FHFA is doing it again! FHFA has increased the maximum conforming loan limits for Fannie Mae and Freddie Mac loans for 2018.

2018 Maximum Conforming Loan Limits

On November 28, 2017, the FHFA increased the maximum conforming loan limits from $424,100 to $453,100 for 2018.  These are substantial increases of nearly 7% which clearly indicate that prices are rising.

The Housing and Economic Recovery Act of 2008 (HERA) sets conforming loan limits for Fannie and Freddie Mac loans. The statute established the baseline loan limit at $417,000. It further mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Fannie and Freddie’s maximum conforming loan limits stayed at $417,000 until last year. in 2016, the FHFA finally increased the loan limit to $424,100 for 2017.  Then, as the FHFA noted on November 28, 2017, home prices are on the rise, requiring a second straight yearly increase in the conforming loan limit.

The FHFA’s third quarter 2017 House Price Index report includes estimates for the increase in the average U.S. home value over the last four quarters. This report showed that house prices increased 6.8%, on average, between the third quarters of 2016 and 2017.

Therefore, the baseline maximum conforming loan limits in 2018 will increase by the same percentage.  The loan limits will increase from $424,100 to $453,100.

Loan Limits in High Cost Areas Increasing Too

Loan limits will also be increasing in what the FHFA calls “high-cost areas.”  Under HERA, maximum loan limits are set in those “high-cost areas.”  Maximum loan limits here are calculated as a multiple of the area median home value, while setting a “ceiling” on that limit of 150% of the baseline loan limit.

According to the FHFA, median home values “generally increased” in high-cost areas in 2017. Accordingly,  the maximum loan limits increased in many of those areas.

Therefore, the new ceiling loan limit for one-unit properties in most high-cost areas will be $679,650.  This is 150% of $453,100 for one-unit properties in the contiguous U.S.  This is a substantial increase over the 2017 high-cost loan limit which was $636,150.

Special statutory provisions establish different loan limit calculations for 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 the FHFA notes that loan limits may be higher in some specific locations.

For a full look at the conforming loan limits, by county, click here.

The FHFA notes that as a result of “generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit,” the 2018 maximum conforming loan limit will be higher in all but 71 counties or county equivalents in the U.S. than it was in 2017.

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