Laws restrict Fannie Mae and Freddie Mac to purchasing single-family mortgages with origination balances that are below a certain amount – this amount is known as the “conforming loan limit.” The Federal Housing Finance Agency (FHFA) has raised the baseline conforming loan limit for 2019. Read on for the reason behind this limit change and what the increase means for homebuyers.
Why has the limit been raised?
The limit increase is a response to significant gains in home values that occurred during 2018. According to the FHFA U.S. House Price Index report, home prices rose in every state between quarter three 2017 and quarter three 2018, increasing an average of 6.9 percent (according to FHFA’s seasonally adjusted, expanded-data HPI). As home prices rise, the maximum loan limit needs to rise so homebuyers can borrow enough to cover the cost of their new home purchase. Raising the conforming loan limits for mortgages purchased by Fannie Mae and Freddie Mac reflects the continuing recovery of the U.S. housing market. In most counties across the country, the 2019 maximum conforming loan limit for a single-family home is $484,350. That’s an increase of $31,250 from the 2018 baseline limit of $453,100.
What does this mean in high-cost areas?
High-cost areas are counties in which 115 percent of the local median home value exceeds the baseline conforming loan limit. In Colorado, that includes Boulder, Denver, Broomfield, Jefferson, Arapahoe, Douglas and Adams counties. In these areas, the loan limit is established as a multiple of the area median home value, while a “ceiling” of that limit is set at 150 percent of the baseline loan limit. Because median home values generally increased in high-cost areas in 2018, the ceiling loan limit in most high-cost areas for one-unit properties is raised to $726,525 for 2019 (or 150 percent of $484,350). In Boulder County, the high balance limit for conforming loans is $626,750.
The increased conforming loan limits went into effect nationwide on January 1, 2019. Loans locked in December 2018 but closing in 2019 are eligible. For more on the new loan limits, including limits in specific Colorado counties, visit elevationscu.com/mortgageblog.
By Lauri Larson, Elevations Credit Union. Lauri is a Mortgage Loan Originator at Elevations Credit Union in Boulder. If you have questions regarding mortgages, please call 303.402.5451 or e-mailLauri.Larson@elevationscu.com. NMLS# 287525, Elevations Credit Union is an Equal Opportunity Lender.