2019 Loan Limits Increase as Home Prices Rise

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Updated on Monday, December 3, 2018

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Home loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac received another annual increase in their limits for 2019.

The maximum conforming loan limit for one-unit properties has increased from $453,100 to $484,350 for most of the U.S., according to a Nov. 27 statement from the Federal Housing Finance Agency (FHFA).

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In higher-cost housing markets where median home prices exceed the conforming loan limit for most of the U.S. (the “baseline”), the 2019 maximum loan limit is $726,525, which is up from $679,650 in 2018. This limit is also referred to as a “ceiling,” and it’s equal to 150% of the annual baseline loan limit.

Loan limits for multi-unit properties have increased to the following amounts:

  • Two-unit: $620,200
  • Three-unit: $749,650
  • Four-unit: $931,600

There are 47 U.S. counties or county equivalents that didn’t see an increase in their conforming loan limits, the FHFA said.

Why loan limits change

Conforming loan limits must be adjusted annually to reflect average home price changes. This is a requirement included in the Housing and Economic Recovery Act of 2008. The law also states that in instances when average home prices decrease, conforming loan limits won’t change for the following year.

Loan limit changes are based off the FHFA’s House Price Index (HPI), which the agency releases quarterly. On the same day it announced the new loan limits, FHFA also released the HPI for the third quarter of 2018, which showed home prices increased by 6.3% from Q3 2017 to Q3 2018. Home prices increased by 1.3% when compared with Q2 2018.

The Federal Housing Administration also adjusts its annual mortgage limits and does so according to the FHFA’s conforming loan limit figures. FHA limits are calculated by taking 65% of the national conforming limit amount in low-cost areas. For high-cost areas, the FHA sets limits at 150% of the national conforming amount. New limits for FHA loans are usually announced each year in early December.

What this means for mortgage borrowers

Conforming loans are mortgages that conform to the standards set forth by Fannie Mae and Freddie Mac, which include not exceeding the baseline and ceiling limits issued by the FHFA each year. Borrowers who want to take out a mortgage that is higher than the stated loan limits are typically looking for a non-conforming, or “jumbo” mortgage.

Jumbo mortgages are typically associated with high-priced, luxury homes and come with strict underwriting guidelines, such as a required down payment of 20% or more and a credit score of at least 740.

On average, jumbo loans have recently had lower rates than conforming loans, possibly because of their stricter underwriting standards or increased competition since the housing meltdown. The average rate for a 30-year fixed-rate jumbo loan with at least a 20% down payment is 4.88%, according to the Mortgage Bankers Association’s latest weekly mortgage applications survey. By contrast, the average interest rate for 30-year fixed-rate conforming loans with at least 20% down is 5.12%.

In related news …

New residential sales data for October 2018 was released Wednesday. The median sales price for new homes sold in October was $309,700 and the average sales price was $395,000, according to the joint report from the U.S. Census Bureau and the Department of Housing and Urban Development.

The number of new homes sold in October was nearly 9% lower than September and 12% below the October 2017 rate. There were 336,000 new homes for sale at the end of October, which represents 7.4 months’ worth of housing supply, according to the seasonally adjusted estimate included in the report. That’s an increase from the 6.5 months’ supply available at the end of September.

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