On Tuesday, November 26th, the Federal Housing Finance Agency announced that they are raising the one-unit conforming loan limits for Fannie Mae and Freddie Mac to $510,400 in 2020 from 2019’s limit of $484,350.
2020 marks the 4th consecutive year that the FHFA announced an increase in loan limits after no increase for a decade from 2006 to 2016. The one-unit conforming loan limits for Fannie Mae and Freddie Mac are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.
Between the third quarter of 2018 and the third quarter of 2019, home prices have increased by 5.38%, according to data from the FHFA. In 2020, the baseline maximum conforming loan limits will increase by this same percentage.
What does this mean for homebuyers and homeowners who want to refinance?
A higher loan limit means more purchase power and better financing options for borrowers. Ultimately, more deserving families will be able to receive the financing they need.
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