The Federal Housing Finance Agency (FHFA) has announced that the 2020 conforming loan limits for government-sponsored enterprises Fannie Mae and Freddie Mac will increase to $510,400 in most areas of the country.
The loan limit will increase from $484,350 in 2019, marking the fourth consecutive year that conforming loan limits for one-unit properties have been raised. Prior to that, conforming loan limits were unchanged from 2006 to 2016. Since 2016, the loan limit has risen by $93,400.
Conforming loan limits have increased because the Housing and Economic Recovery Act (HERA) mandates that the baseline limit be adjusted every year to reflect changes in the average U.S. home price. FHFA’s third-quarter 2019 home-price index estimated that home prices grew by a seasonally adjusted 5.38% over the past four quarters, so the agency increased next year’s conforming loan limit next by the same amount.
Some parts of the country will have a different loan limit. These are mainly high-cost areas where 115% of the local median home value exceeds the baseline loan limit. HERA establishes the loan ceiling in these areas as a multiple of the local median home value and caps the ceiling at 150% of the baseline loan limit. Since median home values generally grew in high-cost areas in 2019, the maximum loan limit in these locations was driven above the 150% threshold. This means that the new conforming loan limit for one-unit properties in most high-cost areas will be $765,600 (150% of $510,400).
Additionally, special provisions set different loan-limit calculations for Alaska, Hawaii, Guam and the U.S. Virgin Islands. The baseline loan limit for one-unit properties in these areas also will increase to $765,600.
As a result of rising home values, as well as the changes in both the baseline loan limit and the high-cost ceiling, the 2020 conforming loan limit will be higher in all but 43 counties (or county equivalents) in the U.S. For a list of 2020 conforming loan limits for all counties and county-equivalent areas, click here.
