Every year, the Federal Housing Finance Agency sets maximum mortgage loan limits for conforming loans. These loan limits are based on median home prices and vary by county. In 2022, the conforming loan limit was set at $647,200 for a single-family home. However, this limit has been increased for 2023. Here’s a look at the conforming loan limits 2023.
What are conforming loan limits for 2023?
Conforming loan limits are set each year by the Federal Housing Finance Agency (FHFA) and they determine the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or “guarantee.” In most U.S. counties, the conforming loan limit 2023 for a one-unit property is $726,200. That means that if you’re looking to get a mortgage for more than that amount, you’ll need a Jumbo loan. The conforming loan limit is higher in certain “high-cost” areas, such as Alaska, Hawaii, Guam and the Virgin Islands. The High Balance loan limits 2023 for these areas will be $1,089,300. These higher conforming loan limits apply to loans purchased on or after Jan. 1, 2023 and will remain in effect through Dec. 31, 2023.
Most lenders begin originating loans at the new loan amount once the conforming loan limits 2023 have been released.
What Do The Conforming Loan Limits 2023 Mean For Borrowers?
Borrowers who are looking for conforming loans will generally have an easier time obtaining financing because these loans are easier to qualify for and less risky for lenders. This is because Fannie Mae and Freddie Mac will backstop conforming loans in case of default, which gives lenders some reassurance. On the other hand, borrowers who are looking for Jumbo loans may have a harder time finding financing because these loans are considered higher risk. As a result, borrowers may have to pay higher interest rates on Jumbo loans.
How will the new loan limits impact the housing market?
The limits for Fannie Mae and Freddie Mac loans were increased for 2023, which will have a positive impact on the housing market overall. The conforming loan limits 2023 are $726,200 for a single family home and $1,396,800 for a four-family home. This is a 12% increase from the previous limit of $647,200 for a single family home and $1,244,850 for a four-family home. The increases are due to rising prices of homes and the need to keep up with the market. The new limits will allow more buyers to qualify for a loan and help to stimulate the housing market. In addition, the new limits will help to create more jobs in the construction and real estate industries.
Will there be revised down payment requirements or an increase in maximum purchase prices?
Down payment requirements for the conforming loan limits 2023 do not change. Because Fannie Mae and Freddie Mac establish underwriting guidelines for conforming loans, the minimum requirements are based on percentages, not dollar amounts. While loan limits vary from year-to-year, down payment percentage requirements for conforming loans remain the same. Home buyers do not need to wait until January 1st, 2023 when the new loan limits go into effect. Lenders begin originating loans at the new loan limits because the loans won’t be sold until after January 1st. Additionally, the maximum purchase price for a home increases based on the percentage amount you are putting down.
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How will the new conforming loan limits affect refinancing?
The new conforming loan limits are positive for those who can refinance from a Jumbo loan to a conventional loan. The previous limits were $647,200 for single-family homes and $1,244,850 for four-unit homes. The new limits are $726,200 for single-family homes and $1,396,800 for four-unit homes. This may not seem like a big difference, but it can make an impact in terms of how much money you can save each month. For example, a homeowner who has a loan that is over $647,200, but below the new $726,200 limit may now be able to refinance at the same interest rate as a homeowner with a loan that is below the new limit. This is because Jumbo loans have higher rates that are above the 2023 conforming loan limits. As a result, homeowners who are looking to take advantage of lower interest rates may want to consider refinancing their current loan.
Homeowners who wish to utilize their home’s equity may now have access to more of it with the new conforming loan limits 2023.
All in all, the changes to the conforming loan limits 2023 are good news for borrowers and lenders alike. The increased limits will help to stimulate the housing market overall, while also giving homeowners more opportunity to refinance their mortgages and take advantage of lower interest rates. If you have any questions about how these changes might impact you specifically, don’t hesitate to reach out to a mortgage professional for more information.
Want to see the conforming loan limit 2023 in your county? Visit the FHFA’s website.