2021 conventional loan limits set by Fannie Mae and Freddie Mac are increasing again for the fifth consecutive year. If you are considering buying a home during this New Year, the loan limit increases may give you more purchasing power and enable you to buy your dream home!

The Federal Housing Finance Agency (FHFA) sets the conforming limits for conventional mortgages. These limits are one factor that determine whether or not Fannie Mae or Freddie Mac will purchase the loan. Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase Mortgage-Backed Securities (MBS) from lenders and then sell those mortgages on the bond market. Loan balances that exceed the conforming limit set by FHFA are considered non-conforming or jumbo loans and are not included in the Mortgage-Backed security pool with conforming mortgages.

The limits are set each year according to home price increases. The FHFA’s House Price Index showed that home prices increased an average of 7.42% between the third quarters of 2019 and 2020. This means that the baseline conforming loan limit will increase by the same amount. On January 1, 2021, the baseline loan limit for the contiguous United States, District of Columbia, and Puerto Rico will be $548,250 for a single unit residence. This is an increase from $510,400 in 2020. There are also limit increases for high cost areas.

For specific inquiries and questions regarding the new loan limit increase, contact one of our loan officers today! One of the most important parts of the home buying process is selecting the right loan officer and finding the best financing option for your situation. For over 90 years, the experts at Standard Mortgage (NMLS#: 44912) have been helping homebuyers and homeowners purchase and refinance their homes.