FHFA Announces Increased Loan Limits for 2018

The Federal Housing Finance Agency (FHFA) announced this week the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2018, will be increased from $424,100 to $453,100. In most of the U.S. this will be the maximum conforming loan limit for one-unit properties. 

The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit be adjusted each year to reflect the change in the average U.S. home prices. And earlier this week, FHFA published its third quarter 2017 House Price Index (HPI) report, which includes estimates for the increase in the average U.S. home value over the last four quarters.  And according to FHFA's seasonally adjusted, expanded-data HPI, house prices increased 6.8 percent, on average, between the third quarters of 2016 and 2017. Therefore, the baseline maximum conforming loan limit in 2018 will increase by the same percentage.

However for areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit the maximum loan limit will be higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a "ceiling" on that limit of 150 percent of the baseline loan limit. Median home values generally increased in high-cost areas in 2017, driving up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas will be $679,650 — or 150 percent of $453,100. Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $679,650 for one-unit properties, but loan limits may be higher in other specific locations.

As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2018 in all but 71 counties or county equivalents in the U.S.