FHFA Raises 2023 Conforming Loan Limit; High Cost Areas Now Over $1m
The Federal Housing Finance Agency (FHFA) just announced that Fannie Mae and Freddie Mac have the green light to purchase loans above $1 million in high-cost areas. The rest of the country will also benefit from a new conforming loan limit of $726,200 --a $79,000 increase.
Raising the conforming loan limit aims to help homebuyers more easily finance one-unit homes in high-cost areas.
Because Fannie and Freddie can't buy or secure non-conforming "jumbo" mortgages (those that exceed the limit), they tend to have stricter underwriting and higher down payment requirements. Some borrowers may also pay higher rates than they would for conforming loans. Thus, by increasing the conforming loan limit, many borrowers will find financing more affordable and accessible.
The FHFA defines conforming loan limits after third-quarter data on home prices is in. The regulator compares home prices year over year and adjusts the limit by the corresponding amount.
Note that the ceiling doesn't drop even if home prices fall, but it will rise if home prices are up year over year. Because house prices have increased about 12% between the third quarters of 2021 and 2022, the conforming loan limit will increase by the same percentage in 2023.
This news comes at the heels of an earlier announcement where federal regulators ordered Fannie and Freddie to slash upfront fees on many purchase loans with a goal of helping first-time homebuyers and low-income borrowers.