As home prices across the country continue to rise, the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) have announced increases in conforming loan limits for 2017.
For the first time since 2006, the FHFA has increased the maximum loan limit for conventional loans through Fannie Mae and Freddie Mac from $417,000 to $424,100.
Conventional Loan Limits Increased
Conforming loan limits for Fannie and Freddie are determined by the Housing & Economic Recovery Act of 2008, which requires that after a period of declining home prices, the baseline loan limit may not rise until home prices return to pre-decline levels. Until this year, average home prices remained below the level of those in the third quarter of 2007—considered the pre-decline price level—so the baseline remained the same. According to the FHFA, the Home Price Index (HPI) value for the third quarter of 2016 was approximately 1.7% above the value for the third quarter of 2007, meaning the baseline loan limit will increase as such.
FHA Loan Limits Increased
Less than a week later, the FHA announced a similar loan limit increase for a whopping 2,948 U.S. counties in 2017. Only 286 counties will remain at 2016 levels. Here in Michigan, the FHA conforming loan limit will rise from $271,050 to $275,665. It will apply to cases assigned on or after January 1st, 2017.
These loan limit increases may seem marginal, but point to a better future. The FHFA and FHA recognize that home values across the nation have recovered, and have responded with an opportunity for homebuyers to increase their buying power.
Some financial institutions have speculated that this 1.7%, $10,000 increase to the conventional loan limit could lead to 40,000 additional originations with $20 billion in loan balances across the country.
Related: One Percent Down Conventional Loan
2017 Loan Limit Summary
- FHA Conforming Loan Limit $275,665
- Conventional Conforming Loan Limit $424,100
- USDA Conforming Loan Limit $424,100
- VA Conforming Loan Limit $424,100 with zero down payment
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