As we all learned on TikTok recently, the FHFA announced the new Conforming Loan Limits for Fannie Mae and Freddie Mac.
I mention TikTok because that is where one of our superb marketing managers heard about it – and that was a reminder to me that TikTok isn’t only about bad dancing and lip-syncing. 😊
As an additional reminder, the Federal Housing Finance Authority (FHFA) is the agency that regulates Fannie Mae and Freddie Mac (the agencies that purchase and/or back all conforming loans).
The big surprise was the size of the increases, which are set out below. The Low Balance limit for a one-unit property increased by almost $100,000, while the High Balance Limit (for “high cost areas” like coastal California) increased by almost $150,000.
What is really interesting to me is that Fannie Mae’s highest loan limit is now close to $2 million (for a 4-unit property) – something NOBODY could have possibly foreseen when Fannie Mae was created in 1938.
LOW BALANCE CONFORMING LOAN LIMITS 2021
(For Texas and most of America)| 1 Unit | 2 Units | 3 Units| 4 Units |
| |
|---|---|---|---|---|
| 2021 Low Balance Limits | $548,250 | $702,000 | $848,500 | $1,054,500 |
| 2022 Low Balance Limits | $647,200 | $828,700 | $1,001,650 | $1,244,850 |
HIGH BALANCE CONFORMING LOAN LIMITS 2021
(For coastal California and "high-cost" areas)| 1 Unit | 2 Units | 3 Units| 4 Units |
| |
|---|---|---|---|---|
| 2021 High Balance Limits | $822,375 | $1,053,000 | $1,272,750 | $1,581,750 |
| 2022 High Balance Limits | $970,800 | $1,243,050 | $1,502,475 | $1,867,275 |
WHO IS THIS GOOD FOR?
- CURRENT HOMEBUYERS: This is great for the huge group of homebuyers currently in the market, as very flexible and competitive Fannie Mae financing (with down payment options as low 5%) is now available for even higher purchase prices, greatly expanding their options.
- MORTGAGE LENDERS AND REALTORS: These loan limit increases benefit mortgage lenders and Realtors too because they enable us to put more buyers into homes.
WHO IS THIS BAD FOR?
- FUTURE HOMEBUYERS: The expansion of conforming loan limits, or the expansion of Fannie’s and Freddie’s more flexible financing offerings, is really just a massive subsidy for the current crop of homebuyers. This is because the higher limits allow thousands of buyers, at the margins, to qualify for purchase prices they otherwise would not qualify for. And this, like all subsidies, simply increases the cost of the asset getting subsidized, e.g. housing. All of the subsidies from the federal government (artificially low interest rates, down payment assistance programs, and expanded loan limits) have been a major reason why housing prices have continued to escalate. This is great for all of us current homeowners, but not so much for all of the twenty-somethings who want to buy homes over the next few years.
- JUMBO BUYERS: Jumbo rates remain about 1/2 percent lower than conforming rates, for strong borrowers with large down payments. But – our best jumbo investors will not allow us to offer jumbo loans under the conforming loan limits (low or high balance) for a particular area. Hence, many strong borrowers who wanted much lower rate jumbo financing will now have to take higher rate Fannie Mae financing.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
