The FHFA announced that Fannie Mae and Freddie Mac are expanding conforming loan limits to $548,250 up from $510,400. That’s a 7.5% increase expected in 2021. This has been the fifth consecutive year that the FHFA has expanded loan limits for conforming loans.
In reality, it shouldn’t be a surprise. Median housing prices have been rising quickly over the last couple of years, and the FHFA has had to make changes accordingly. Loan limits are determined by the Housing and Economic Recovery Act of 2008, whose job is to prevent another subprime mortgage crisis from ever happening again.
HERA, which established $417,000 as the initial base loan limit in 2008, mandated that loan limits could be expanded once housing values surpassed pre-decline levels. So far, we’ve been on a winning streak for five years, with no end in sight.
This is great news for first time home buyers who were worried about being priced out of a conventional loan.