For the second year, the Federal Housing Finance Agency, who oversees Fannie Mae and Freddie Mac, has increased loan limits on conforming mortgages in 2018.
The increase in 2018 conforming loan limits matched rising home prices felt across the U.S. Based on its House Price Index, the FHFA revealed that house prices jumped 1.4% in the third quarter of 2017. On a year-over-year basis, home prices rose 6.5%.
2018 Conforming Loan Limit
Beginning 2018, you can borrow more for a home using a conforming loan. For a one-unit property, the baseline loan limit has increased to $453,100 from $424,100 in 2017.
For those borrowing for single-unit homes in high-cost areas, the loan limit further increases to $679,650 or 150% of the baseline loan limit. This is the ceiling loan amount for one-unit properties.
- In most counties in the U.S., the conforming loan limit for one-unit homes is $453,100.
- In high-cost areas in the U.S., the single-unit conforming loan limit is $679,650.
- There are counties whose maximum loan limit for one-unit homes is between $453,100 and $679,650.
- The loan limit is higher for two-to-four-unit properties.
Per the FHFA, all but 71 counties will have higher conforming loan limits effective next year.
The updated loan limits are applicable to mortgages acquired by Fannie Mae and Freddie Mac in calendar year 2018 and originated after October 1, 2011 or before July 1, 2007.
Rise in Home Values Spurs Increase in Loan Limits
“In determining 2018 maximum loan limits under the terms of HERA, FHFA used the seasonally adjusted expanded data HPI,” its statement read.
The Housing and Economic Recovery Act of 2008 requires that the baseline loan limit be adjusted each year to reflect the changes in the national average home price.
Per the FHFA’s calculation, the increase in the index or home values between 3Q16 and 3Q17 is 6.8%.
FHFA Deputy Chief Economist Andrew Leventis said, “With relatively favorable economic conditions and a continued shortage of housing supply, price increases in the third quarter were generally robust and widespread.”
* Home prices increased in all 50 states and the District of Columbia from 3Q16 to 3Q17. These five states showed the highest increase in home prices:
- District of Columbia – 11.6%
- Washington – 11.5%
- Hawaii – 11.0%
- Arizona – 10.0%
- Nevada – 9.6%
* The FHFA found that home prices in all of the 100 largest metropolitan areas in the U.S. saw an increase over the last four quarters.
- Seattle-Bellevue-Everett, WA posted the highest home price increase at 14.6%.
- Camden, NJ, meanwhile, recorded the lowest increase in home prices at 0.50%.
* Annual home price appreciation among nine census divisions:
Pacific posted the strongest annual price gain – 8.9% since 3Q216 and a 1.7% since 2Q17.
Middle Atlantic showed the weakest performance with prices increasing at 4.8% on annual basis.
The higher borrowing limits for conventional loans in 2018 add to flexibilities in mortgage guidelines being rolled out by Fannie Mae and Freddie Mac.Click to See the Latest Mortgage Rates»