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The Federal Housing Finance Agency (FHFA) has announced that the maximum conforming loan amount for mortgages acquired by Fannie Mae and Freddie Mac will increase for 2018. In the vast majority of localities throughout the U.S., the 2018 maximum conforming loan limit for one-unit properties will be $453,100. That is an increase of $29,000 from the 2017 limit of 424,100.
A conforming loan is a mortgage loan that conforms to government-sponsored enterprise (GSE) guidelines, which apply to all loans backed by Freddie Mac or Fannie Mae. Besides the size of the loan, some other types of GSE guidelines include borrower’s loan-to-value ratio or the amount they can afford for a down-payment, their debt-to-income ratio, credit score and history, and documentation requirements.
Increase In Home Loan Limits Due to Higher Home Prices
The increased home loan limits are a result of higher home prices. The Housing and Recovery Act (HERA) of 2008 requires that the FHFA adjusts its baseline loan limits each year to reflect changes in average U.S. home prices. According to the FHFA, its data shows that home prices increased 6.8% on average from the third quarter of 2016 to the same quarter this year.
While the baseline limit will apply to much of the country, there is a special statutory limit of $679,650 which applies to Alaska, Hawaii, Guam and the U.S. Virgin Islands. This higher amount will also be the ceiling loan limit in many areas where home prices are particularly high-specifically in areas where 115% of the local median home value exceeds the baseline limit. The limit in Fairfax, Louden, and many other Northern Virginia counties, for example, will be $679,650, while the limit in nearby Baltimore County, Maryland, will be $517,500.
To see what the limit is in a specific locality, the FHFA has published a useful online map showing the new loan limits.
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