Fannie Mae and Freddie Mac will let mortgage borrowers nationwide take out home loans over $500,000 in 2020.
The Federal Housing Finance Agency announced last Tuesday that it will increase the limit on conforming loans, meaning mortgages that adhere to the standards imposed by Fannie Mae and Freddie Mac to a maximum of $510,400 nationwide. In high-cost areas, the maximum loan limit for mortgages acquired by Fannie Mae and Freddie Mac will be $765,600.
On a local level, the loan limits were set higher in all but 43 counties across the country, the FHFA reported. In Los Angeles County, the limit is 765,600; Riverside and San Bernardino counties $510,400. The FHFA published a full list of the loan limits for each county nationwide for borrowers to reference.
By law, conforming loan limits must be adjusted to reflect changes in home prices across the U.S. The FHFA noted that its data show home prices had increased on average 5.38% between the third quarters of 2018 and 2019. Therefore, the loan limits increased by that percentage.
This is the fourth consecutive year that the conforming loan limit has increased. After holding limits at $417,000 from 2006 through 2016, the FHFA increased loan limits for the first time in 2017. That sparked enthusiasm across the mortgage industry as lenders expected it could lead to more people seeking home loans, because the lower loan limit forced many people to get jumbo loans that don’t always offer competitive financing.
Higher Limits, Higher Risk