Realtors hailed the Federal Housing Finance Agency's decision to increase the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2018 to $453,100 on one-unit properties and a cap of $679,650 in high-cost areas. The previous loan limits were $424,100 and $636,150, respectively. This is the second straight year and the second time that the FHFA has raised the conforming loan limits since 2006.
The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than conforming loans, increasing monthly payments and negatively impacting affordability for families to purchase homes.
"We are pleased that the FHFA has raised the existing Fannie Mae and Freddie Mac conforming loan limits. For higher-cost places like Silicon Valley, the more that the conforming loan limit is raised, borrowers have better access to affordable long-term, fixed-rate mortgage credit. This increase will give more homebuyers the opportunity for homeownership," said Denise Welsh, president of the Silicon Valley Association of Realtors.
The FHFA said rising home prices necessitates a second straight yearly increase in the conforming loan limit. The Housing and Economic Recovery Act requires that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. According to FHFA's seasonally adjusted, expanded-data HPI, house prices increased 6.8 percent, on average, between the third quarters of 2016 and 2017. Therefore, the baseline maximum conforming loan limit in 2018 will increase by the same percentage.
The maximum loan limit for 2018 will be higher in all but 71 counties or county equivalents in the U.S., according to the FHFA. In most of the country, the 2018 maximum loan limit for one-unit properties will be $453,100. In high-cost areas like Santa Clara and San Mateo counties and most counties in the Bay Area, the cap will be $679,650.
"Realtors have long advocated for making higher conforming loan limits permanent. As a result of efforts by local, state and national Realtor associations, cities with high median home prices have benefited from a loan limit above the national conforming loan limit," said Welsh.
The maximum loan limits are also increasing in 2018 for multi-unit properties to $580,150 for two-units ($870,225 in high-cost areas), $701,250 for three-units ($1,051,875), and $871,450 for four-unit properties ($1,307,175).
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.