Mortgage loan limits exist to set the maximum amount a borrower can get for a mortgage. The Federal Housing Finance Agency (FHFA) establishes these limits each year based on the national conforming loan limit. This is the maximum loan amount that can be purchased by Fannie Mae and Freddie Mac.
As of 2023, the national conforming loan limit is $726,200 for a single-family home, although it can be higher in certain high-cost areas.
Rise in Mortgage Limits in 2023
In 2023, the baseline conforming loan limit saw an increase to $726,200 from the 2022 limit of $647,200. The Federal Housing Finance Agency (FHFA) has set this limit, which applies to most areas in the United States.
However, in Alaska and Hawaii, the limit will be even higher at $1,089,300 for a 1-unit property.
Understanding Loan Limit Changes
The mortgage limit changes impacted three types of loans in 2023.
Let’s dive into the details
Conventional Loan Limits
The Federal Housing Finance Agency (FHFA) raised the baseline conforming loan limits for 2023 by $79,000 to $726,200 for single-unit properties, a 12.21% increase. High-cost areas have higher limits, set on a county-by-county basis. For Alaska and Hawaii, the limit is $1,089,300.
Standard mortgage financing programs apply to single-family properties with up to 4 units. The loan limits increase based on the number of units in the property.
VA Loan Limits
VA loans typically don’t have loan limits since the VA insures a fixed percentage of the mortgage for lenders in the event of default, regardless of the loan amount. However, limits apply in certain situations such as having impacted entitlement or when lenders consider the loan a slightly higher risk.
Impacted entitlement can occur if you haven’t fully paid back a previous VA loan or had a foreclosure you haven’t paid back to the VA. Lenders may have different qualification requirements for jumbo VA loans that they consider a higher risk.
FHA Loan Limits
At the beginning of each calendar year, the Federal Housing Administration (FHA) loan limits residential properties up to 4 units.
The FHA loan limits are set at the county level, with the lowest limit being 65% of the national conforming loan limit. Which is $472,030 for a single-unit property in 2023.
However, loan limits are often higher in many areas. Alaska and Hawaii have the highest limit at the national ceiling of $1,089,300 for single-unit properties.
How do mortgage loan limits work?
Loan limits are essential in determining the maximum amount you can borrow under various mortgage programs, and they vary based on where you live and the type of mortgage loan you choose.
Conventional mortgages and FHA generally adhere to separate loan limits, while VA loans abolished limits in 2020.
Fannie Mae and Freddie Mac have a set of loan limits to keep their nationwide programs available to those in need. For instance, Fannie Mae prefers issuing multiple smaller loans rather than a single $10 million loan.
Thankfully, loan limits are rising in 2023 to mirror the increasing home prices nationwide.
Why do Loan Limits Matter?
When considering mortgage options, it’s important to understand your area’s conforming loan limit. This limit determines whether a loan is considered a jumbo loan, which typically has stricter qualification standards than a conforming loan.
Mortgage loan limits have gone up in 2023. An increased loan limit allows home buyers to purchase their dream homes without applying for a jumbo loan!
Frequently Asked Questions
1. Has Fannie Mae announced 2023 loan limits?
Yes. Fannie Mae has announced 2023 limits. The new limit is $726,200 for most of the country.
2. What is the jumbo mortgage limit for 2023?
As of January 1, 2023, the FHA raised the jumbo loan limits, providing potential homeowners with more options after a year of record housing price increases. The 2023 FHA jumbo loan limits single-family loan limit "floor" is $472,030, and the new "ceiling," or maximum, is $1,089,300.