federal government changes to FHA loans

Fannie Mae and Freddie Mac Announce Conforming Loan Changes for 2019

The federal government has signaled important changes to the Fannie Mae and Freddie Mac programs. Specifically, the Federal Housing Financing Agency (FHFA) has announced increased conforming loan limits for one-unit properties to $484,350 in 2019. This is an increase from 453,100 in 2018.

Why the Change?

The Housing and Recovery Act (HERA) requires that the baseline conforming loan limit be readjusted each year based on average home prices. This loan limit is the maximum loan amount that the government (HUD) will accept the following year. This is based on the previous year’s average home sale price.

According to FHFA, the price of housing increased an average of 6.9 percent between the third quarters of 2017 and 2018. The baseline limit will increase accordingly to the new number. This makes the third year in a row the agency has increased the conforming loan limit.

High Cost Areas

The FHFA also monitors areas that it deems as high cost areas. These are areas where 115 percent of the local median home value exceeds the baseline loan limit.

HERA declares that the maximum loan limit in these areas is a multiple of the area median home value, with a ceiling at 150 percent. Therefore, the new ceiling limit in high cost areas for one-unit properties will be set at 726,525 for 2019, 150 percent of $484,350.

According to FHFA’s press release: “As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2019 in all but 47 counties or county equivalents in the U.S.”

For states and territories outside of the continental U.S., the baseline loan limit will be $726,525 for one-unit properties. New FHA loan limits will match those of Freddie Mae and Freddie Mac.

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