The Federal Housing Finance Agency (FHFA) announced on November 29th that the baseline conforming loan limit in 2023 for mortgages backed by Fannie Mae and Freddie Mac will be $726,200! That’s an increase of 12.21%, or $79,000 compared to the 2022 conforming loan limit of $647,200.
Owners of one-unit properties in designated high-cost areas, such as counties like Los Angeles County, Washington, D.C., and New York County, will, for the first time ever, can now borrow government backed mortgages up to $1,089,300!
The FHFA increases the conforming loan limited based on a formula related to home prices. As home prices increase, so do the loan limits. The increase, in part, confirms that despite the recent downward trend in home prices, prices are still significantly higher than when loan limits were last increased in November 2021.
The new loan limit announcement has sparked a debate about whether the government should be backing mortgages as high as $1 million, but it’s unfair to individuals in higher cost areas that have seen corresponding home price increases as those who do not live in high-cost areas to be unable to obtain the same necessary financing products for homeownership.
Higher conforming loan limits help more buyers finance their home purchase without having to resort to jumbo loan programs. Being able to utilize a FHFA conforming loan instead of having to obtain jumbo loan, will allow borrowers to finance their homes and obtain lower interest rates more easily. Even in areas not designated high-cost areas by FHFA such as Austin, Texas, home prices have risen significantly over the past 2 years and a $726,200 conforming loan limit is a welcome sight for one-unit buyers in those areas.
Below is a quick illustration of the maximum purchase price you can offer on a home based on your down payment if you plan to utilize the maximum loan limit available in your area:
If you live in an area with a loan limit of $726,200:
|
Down Payment:
|
Maximum Purchase Price:
|
|---|---|
|
3%
|
$748,660
|
|
5%
|
$764,421
|
|
10%
|
$806,889
|
|
20%
|
$907,750
|
If you live in a designated high-cost area with a loan limit of $1,089,300:
|
Down Payment:
|
Maximum Purchase Price:
|
|---|---|
|
3%
|
$1,122,990
|
|
5%
|
$1,146,632
|
|
10%
|
$1,210,333
|
|
20%
|
$1,361,625
|
If you have questions on how higher loan limits might help you finance your home purchase, give us a call at 512.881.5099 or apply now, and one of our loan officers will be in touch as soon as we receive the application.
