2021 Loan Limits Are Out and They’re Up!

Today, Fannie Mae & Freddie Mac released their updated loan limits for 2021.  Each year, maximum loan limits on conventional loans are adjusted based on median home values and the overall housing market.  For 2021, we’re seeing a 7.5% increase to conventional loan limits!  The new maximum loan limit nationwide will be $548,250!

What does this mean?

Well, conventional loans are the most popular mortgage loan options on the planet, offering low rates, flexible guidelines, and financing options for a wide range of borrowers.  BUT, these loans are only available up to a certain loan amount.  That means for people buying expensive homes that exceed these amounts, the result is often a larger down payment, higher interest rates, and tougher guidelines to qualify.  So an increase in loan limits means more people will have access to more expensive homes with more competitive financing products!

What about REALLY expensive areas?

One great function of FannieMae & FreddieMac is that they offer flexibility for those in more expensive markets.  Labeled “high cost” areas, Fannie and Freddie loan limits go BEYOND the loan limits for the rest of the country, allowing loan amounts all the way up to $822,375!  These increased “high cost” loan limits vary by county, and are based on the median home value within high cost markets.  For example, El Dorado county in California allows loan limits beyond the national limit, but below the maximum high cost county limits – coming in with a max loan limit of $598,000.

For home buyers?  Sellers?  Agents?

For those involved or soon-to-be-involved in real estate transactions, it’s important to note these limits could affect marketability – having a home price that lines up with low down payment options within conventional guidelines can open the door to many more buyers than if a home is priced primarily in the ‘jumbo loan’ range.  For example, now in 2021, home buyers can put 5% down and use conventional financing on a home priced as high as $577,105.  In 2020, the home price to allow the same access to financing would have been capped at $537,263.

This is tremendous for home buyers as well, because these increase comes with currently-historically-low rates.  So financing $548,250 today at today’s rates is actually CHEAPER on a monthly basis than it would have been to finance $510,400 with the higher rates the industry offered in late 2019-early 2020.  So not only can borrower’s afford more, but they can lock in loans today on more expensive homes with relatively low monthly payments due to the current rate environment.

FHA loans?  VA loans?  Others?

What about other loan types?  Limits haven’t been released yet for FHA loans, but they usually follow suit and adjust typically along with conventional limits, so we can expect about a 7.5% increase in FHA loan limits as well.  VA loans no longer have a loan limit, and other portfolio loans don’t follow conventional or government guidelines, so those loan limits and caps are established by each unique lender offering those products.