2021 Loan Limits Expand Buyer Options

Hands filling out paperwork

This year’s house hunters may enjoy a significant boost to their buying power. Conforming loan limit maximums rose 7.42%, on average, potentially allowing buyers to borrow more toward their dream home. Combined with a continuing trend of low interest rates and our closing cost assistance offer, this increased credit access may motivate your clients to get off the fence and buy! Check the loan limits for your county and share them with your buyers. Some areas where we build saw increases as much as $56,775, but others saw more modest gains or no change, so it’s important to get the right info for your area.

See how conventional and FHA loan limits changed in some areas where we build.

What’s a conforming loan limit (CLL)?

By law, Fannie Mae and Freddie Mac can only purchase or guarantee mortgages on single-family, one-unit dwellings up to a maximum balance. Loans that fall under that limit are called conforming loans. Borrowing above that level requires a non-conforming (jumbo) loan, which typically has different terms, interest rates and prerequisites. Learn more about conforming loan limits on the Federal Housing Finance Agency’s website.

What determines conforming loan limits and why do they change?

If you look at the FHFA’s map, you’ll notice that not all counties have the same conforming loan limit. Many are assigned the national baseline of $548,250, but you’ll see a higher ceiling in Alaska, Hawaii and areas where home values are greater—as much as $822,375 in 2021. The Housing and Economic Recovery Act (HERA) requires that the CLL reflect average U.S. home prices based on the Federal Housing Finance Agency House Price Index® (FHFA HPI®). That’s why high-cost areas have higher limits, and why the loan limits are adjusted annually as home prices fluctuate over time.    

How does the conforming loan limit affect FHA lending limits?

FHA lending limits range from 65% to 150% of the national conforming loan limit, so increases to the CLL may also increase the amount buyers can borrow with FHA financing. Of course, the actual amount buyers can borrow will ultimately depend on the property, their credit worthiness and other factors. Check out Forbes’ article all about 2021 FHA lending limits here.

Other mortgage resources to share with your clients: