FHFA Increases Conforming Loan Limits for 2021

Perhaps it’s a result of historically low interest rates. Or maybe it’s the stay-at-home orders. But to the surprise of many, the housing market has had an incredibly strong showing in 2020, despite the COVID pandemic’s impact on the broader economy.

Inventory is extremely tight and buyer demand is high, which has driven up home values and lead the Federal Housing Finance Agency (FHFA) to announce an increase in conforming loan limits for 2021. These limits represent the caps at which Fannie Mae and Freddie Mac will purchase loans, and therefore determine the point at which borrowers cross over into jumbo loan territory.

This limit varies by region. Most of the country (including San Bernadino and Riverside Counties) will see a 7.4% jump from 2020’s limit of $510,400 to the new limit of $548,250. Meanwhile, traditionally pricier markets (including Los Angeles and Orange Counties) will see an increase of over $56,000, from $765,600 to $822,375.

This ultimately spells good news for buyers. Jumbo loans are limited. So even qualified borrowers aren’t guaranteed to secure one. As a result, buyers relying on jumbo loans are often passed over by sellers in favor of more sure bet buyers offering all cash or conforming loans – even if the terms offered those sure bet buyers aren’t necessarily as generous.

Additionally, this increase raises the price range from buyers hoping to take advantage of federal first-time home buyer programs. It also paves the way for borrowers currently under a jumbo loan mortgage to refinance into a conforming loan.

On the seller side, increased conforming loan limits opens the market to a larger swath of buyers — an inarguable a win for those looking to hit the market with their home in 2021.

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