What are home loan limits for 2023?
The Federal Housing Finance Agency (FHFA) raised conforming loan limits to $726,200 for one-unit homes in most areas of the U.S.
The FHFA sets annual conforming (also known as conventional) loan limits for lenders based on house prices. That’s why, with the housing market seeing historic increases in value throughout 2022, the FHFA raised the 2023 conforming loan limits – which can impact fees and other factors in a mortgage.
Conforming vs. non-conforming
Home loans are often distinguished as being conforming or non-conforming. Conforming loans are designed to meet criteria set by the FHFA, Fannie Mae, and Freddie Mac.
Non-conforming loans are home loans that don’t meet these criteria.
Mortgage loans that meet conforming loan limits avoid requirements, restrictions, and fees non-conforming loans may be subject to. These conventional loans give you the benefits of lower down payments, lower minimum credit score requirements, and lower mortgage rates.
2023 conforming loan limits
The FHFA released new conforming loan limits on 11/29/2022. The baseline limit for a one-unit home in 2023 is $726,200 an increase of $79,000 over the 2022 limit of $647,200.
The new limit for a one-unit home in the highest-cost areas is $1,089,300, an increase of $118,500 over the 2022 limit of $970,800.
How does the conforming loan limit work?
The FHFA oversees Fannie Mae and Freddie Mac, government-sponsored enterprises that play important roles in the mortgage market. Fannie Mae and Freddie Mac purchase home loans from lenders to create mortgage-backed securities for investors. This process provides lenders funds to offer you affordable mortgage options.
The FHFA, Fannie Mae, and Freddie Mac set standards for mortgage loan requirements, such as minimum credit scores and maximum debt-to-income ratios (DTI). Conforming loan limits establish the maximum amounts for mortgages Fannie Mae and Freddie Mac may acquire.
Conforming loan limits are not the same for every part of the country. The FHFA updates the baseline conforming loan limit annually based on its house price index (HPI) report, and this covers most of the U.S. However, limits are higher in areas with higher median home prices, such as San Francisco, New York, Hawaii, Alaska, Guam, and the U.S. Virgin Islands. This is an advantage for homebuyers in these areas because conforming loans tend to have more flexible credit requirements and better terms than non-conforming loans.
Exactly how do high-cost areas differ?
The median home price can be very different depending on the state or county. That's why the FHFA has higher maximum conforming loan limits for areas where 115% of the median home value exceeds the baseline conforming loan limit. The maximum conforming loan limit for these high-cost areas depends on the median home value, up to 150% of the baseline loan limit.
To better understand the importance of the high-cost designation, imagine you are house hunting for a million-dollar home in two California counties.
County A is not designated a high-cost area by the FHFA, meaning you'll need a jumbo loan with stricter eligibility requirements and higher interest rates and fees.
County B is considered a high-cost area, allowing you to buy your dream home with a conventional loan – and save money in the process.
Do loan limits change by loan type?
Home loans don’t always stay within the conforming loan limits – and some even come with stricter standards. Jumbo loans, for example, are for amounts above the loan limits. These mortgage loans often come with heightened eligibility standards, higher down payment requirements, and higher interest rates and fees. In exchange, loan amounts in the millions give you the power to buy a higher-priced home.
Government-backed loan products have different loan limits than the FHFA's. The Department of Veterans Affairs (VA) backs VA home loans to provide eligible Veterans, Active-Duty Service Members, and Surviving Spouses home financing with no loan limit. The Federal Housing Administration (FHA) backs FHA loans with lower loan limits based on the FHFA's guidelines.
More home financing options for 2023
As the new year draws near, we want to make your mortgage a win. Our library of mortgage loan programs includes products to meet your needs in the housing market today, tomorrow, and the years to come.
To see how we can help, imagine these situations:
- Maybe you want to buy a home before 2023. Our Early Bird Program will honor the new loan limits now.
- Perhaps your dream home goes beyond the conforming limits. We offer a range of jumbo loans up to $4 million for a higher-price house or luxury estate.
- Or your financial situation requires a unique approach to home financing. Our Signature Series Loan Programs give you non-traditional options for your home purchase.
Whatever your homebuying goals or personal circumstances, our dedicated team is here to give you one-on-one guidance and personalized mortgage solutions. Contact your CrossCountry Mortgage loan officer to start your home financing journey today.