What is the New Conforming Loan Limit for 2024?
The Federal Housing Finance Agency (FHFA) has announced a $40,350 increase in the baseline conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac to $766,550 in 2024. This represents a 5.5% increase from the 2023 conforming loan limit of $726,200. This change is significant for homebuyers and mortgage lenders, as it affects the maximum home loan amount for single family homes that can be acquired with a conventional mortgage.
Why is the Conforming Loan Limit Important?
The conforming loan limit represents the maximum conventional loan amount that can be guaranteed by government-sponsored enterprises (GSEs), namely Fannie Mae and Freddie Mac. This guarantee offers benefits in terms of loan approval processes and interest rates. While loans are available above this limit, known as jumbo loans, they typically come with stricter requirements. Conforming loans constitute a major portion of new mortgages, emphasizing their significance in the housing finance ecosystem.
What About Higher Cost Areas?
In high cost areas, the loan limits are adjusted above the baseline to reflect local housing market prices. For 2024, the high cost area limit is $1,149,825, which is particularly relevant for areas where average home prices are significantly higher than the national average. High cost areas include the San Francisco Bay Area, much of the Los Angeles basin, Colorado’s ski regions, much of the Washington DC metro area, and much of the greater New York City metro area.
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April 28, 2024
2024 Loan Limits for Multi-Unit Properties
The Federal Housing Finance Agency (FHFA) has not only increased the baseline conforming loan limit for single-family homes but also adjusted the limits for multi-unit properties. These changes are crucial for investors and buyers interested in purchasing multi-unit properties with conventional mortgages. Here’s a breakdown of the 2024 loan limits for multi-unit properties:
- One-Unit Properties: The limit is set at $766,550, aligning with the baseline limit for single-family homes.
- Two-Unit Properties: The loan limit increases to $981,500, offering greater flexibility for those looking to invest in duplexes.
- Three-Unit Properties: For triplexes, the limit is further elevated to $1,186,350.
- Four-Unit Properties: The highest limit is for four-unit properties, set at $1,474,400.
Multi-Unit Loan Limits in High-Cost Areas
The FHFA has also adjusted the loan limits for properties located in high-cost areas. These areas are typically where 115% of the local median home value exceeds the baseline loan limit. The 2024 loan limits in these areas are significantly higher, reflecting the elevated property values:
- One-Unit Properties: The limit is $1,149,825, which is substantially higher than the baseline.
- Two-Unit Properties: For duplexes in high-cost areas, the limit is set at $1,472,250.
- Three-Unit Properties: The limit for triplexes rises to $1,779,525.
- Four-Unit Properties: The highest limit, for four-unit properties, is at an impressive $2,211,600.
These increased loan limits for multi-unit properties and high-cost areas represent a significant change from previous years. They provide more opportunities for homebuyers and investors to secure financing for larger, more expensive properties, especially in competitive housing markets. It’s essential for potential buyers and investors to be aware of these changes to plan their property purchases and investments accordingly.
How Does the FHFA Determine These Limits?
The FHFA sets these limits based on home price data from the third quarter of each year. Notably, even if home prices drop, the conforming loan limit does not decrease but remains static until prices rise above the previous levels. This approach ensures stability in the mortgage market, a factor we consider when advising clients on their mortgage options.
What’s the Impact of Home Price Changes?
Despite a deceleration in home prices in early 2023, the year-over-year growth remained positive, with an annual home price appreciation of 5.5%. This rate surpasses the Federal Reserve’s 2% inflation target, highlighting ongoing affordability challenges in the housing market. The conforming loan limit increases can assist in mitigating these challenges to some extent.
When Do the New Limits Take Effect?
The newly announced conforming loan limits for 2024, set at $766,550, can be used starting now. This means that lenders can start applying these limits immediately, as it typically takes at least a month for a new loan to be delivered to the GSEs (Government Sponsored Entities, Fannie Mae, and Freddie Mac). However, lenders adopt these new limits at different speeds.
Notably, many lenders had already offered limits around $750,000 in anticipation of the increase, adapting early to the expected changes. This proactive approach by lenders ensures that borrowers can benefit from the higher limits as soon as possible, reflecting the dynamic nature of the mortgage industry.
Are There Changes in FHA Loan Limits?
The Federal Housing Administration (FHA) has also announced their loan limits for 2024. The 2024 FHA loan limit is increasing to $498,257. These changes, effective from January 1, will see the “floor” limit for FHA loans on one-unit properties rise to $498,257, up from $472,030 in 2023. Simultaneously, the “ceiling” limit will increase to $1,149,825 from the previous year’s $1,089,300. The “floor” and “ceiling” in FHA loan limits represent the minimum and maximum amounts the FHA will insure for mortgages, with the floor set for lower-cost areas and the ceiling for high-cost areas, ensuring coverage across a wide range of housing markets. This adjustment represents an increase of $26,227 for the floor and $60,525 for the ceiling, reflecting the FHA’s response to evolving market conditions and ensuring continued access to homeownership for a broader range of buyers.
Conclusion
The increase in the conforming loan limits for 2024 reflects the evolving dynamics of the housing market and opens up new possibilities for homebuyers and investors. At JVM Lending, we are committed to providing expert guidance and up-to-date information, ensuring our clients are well-equipped to navigate these changes in the mortgage landscape. We’re happy to answer any questions you might have about loan limits or the mortgage process. Reach out to us with any questions or if you need assistance at (855) 855-4491 or email [email protected].
