The Housing and Economic Recovery Act (HERA) requires that the conforming loan limit is reevaluated each year to reflect the average U.S. home price. Home prices have increased 6.8% in the 3rd quarter of 2017 when compared to the same time period in 2016. With housing prices rapidly increasing, this has allowed the Federal Housing Finance Agency (FHFA) to increase the Fannie, Freddie and FHA loan limits for 2018.
Effective January 1, 2018, the loan limit will rise from $424,100 to $453,100 due to the rising home prices. This is the second time since the housing crisis in 2006 that this limit has been raised, last year the limit was raised from $417,000 to $424,100.
The ceiling loan limit will rise to $636,150 to $679,650 in 3,011 high-cost counties- 150% of the baseline home limit. The same increase will be effective for FHA backed reverse mortgages. The floor will also be raised the on first of the new year, from $275,665 to $294,515.
Fannie May and Freddie Mac have made a number of changes over the past couple years to make obtaining mortgages more accessible, most recently by lowering the debt to income ratio for applicants with good credit who carry student loan debt.
FHA loan limits are 115% of the median home price of the county at hand, which is determined by the Department of Housing and Urban Development (HUD). You can look up counties at this HUD.GOV website by clicking here. To learn more about starting the home buying process, contact us or visit our general mortgage page.