The Federal Housing Finance Agency (FHFA) has finally decided to increase conforming loan limits for 2017 under Fannie Mae and Freddie Mac. This is great news for home buyers purchasing in this ever increasing real estate market.
Why the Limit Remained the Same for So Long?
The current baseline loan limit is $417,000 for a conforming single family home loan. This is actually the “floor”, meaning that even in the lowest markets, the loan limits will be at least $417,000. This baseline has remained the same for the past 10 years. It typically adjusts annually based on changing real estate market conditions. However, when the market began dropping, there was no need to increase the loan limit.
Why Change Now?
Increasing baseline loan limits is a good sign that the market has truly rebounded. Essentially, home prices have finally increased enough overall to warrant a change. The conforming loan limits baseline for 2017 will be 1.7% higher (matching the percentage increase of the House Price Index) at $424,100. This takes effect on the first of the year.
Conforming Loan Limits in Different Markets
As explained above, $424,100 will be the baseline loan limit across markets. However, some areas have much higher selling prices. In regions where the median home value is 115% or higher than the baseline, the maximum loan limits will reflect median home values. However, there is a ceiling to the loan limits as well. That ceiling is 150% of the baseline, or $636,150.
Summary of Conforming Loan Limits for 2017
So, in summary, conforming loan limits for 2017 can range from $424,100 to $636,150, depending on median home prices in the specific area. Even in low priced markets, the limit will be at $424,100. In higher priced markets, it will depend on 2016 median selling prices of homes. Given that Massachusetts has seen dramatic increases in selling prices, the limit will rise for most home buyers looking to purchase in desirable markets.
If you are looking to purchase a home in 2017, contact me for information on what the loan limits are in your area and how that may impact your home buying plans.