Jumbo Home Loan Limits: Everything You Need to Know
If you are looking to secure a jumbo loan, getting a clear understanding of everything that this type of mortgage encompasses will help you make the right decisions at each step of your home buying journey.
Components such as jumbo loan criteria, the maximum amount you can borrow, the rates of jumbo mortgages or simply the benefits of this type of financing are essential for planning out your mortgage strategy.
Another important aspect of jumbo home loans are the limits – in other words, what are the conforming loan limits in 2024, what are some of the factors affecting them, and what are some key points to consider?
In this article, we will discuss everything you need to know about jumbo home loan limits – so, let’s get right into it:
What Are The Conforming Loan Limits in 2024?
By definition, jumbo loans are mortgages that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA).
This means that they cannot be purchased by Fannie Mae and Freddie Mac, two of the key government-sponsored enterprises (GSEs) in the United States that play a pivotal role in the mortgage market by purchasing and securitizing conforming loans.
Conforming loan limits ensure that these loans adhere to specific criteria, which helps maintain market stability, lower interest rates, and create a standardized framework for lenders and borrowers alike.
So, when it comes to jumbo home loan limits, what are the amounts that qualify a home loan as a jumbo one?
According to the FHFA, the conforming loan limits in 2024 are $766,550 for one-unit properties in most of the US, an increase of $40,350 compared with 2023.
For high-cost areas, in which 115% of the local median home value exceeds the baseline for conformity loan limits, the ceiling for one-unit properties is $1,149,825, which is 150 percent of $766,550.
Conforming Loan Limits by Property Type
For most parts of the contiguous United States, the conforming loan limits are as follows:
1-Unit Properties: $766,550
2-Unit Properties: $981,500
3-Unit Properties: $1,186,350
4-Unit Properties: $1,474,400
For Alaska, Guam, Hawaii, and the U.S. Virgin Islands, we are looking at the following jumbo home loan limits according to Fannie Mae:
1-Unit Properties: $1,149,825
2-Unit Properties: $1,472,250
3-Unit Properties: $1,779,525
4-Unit Properties: $2,211,600
Conforming Loan Limits by Area
As we mentioned earlier, high-cost areas – such as San Francisco, Los Angeles, New York City, and Washington, have different numbers when it comes to jumbo home loan limits:
1-Unit Properties: $1,149,825
2-Unit Properties: $1,472,250
3-Unit Properties: $1,779,525
4-Unit Properties: $2,211,600
In 2024, Several states – such as Alaska and Hawaii, as well as Guam, Puerto Rico, and the U.S. Virgin Islands do not have any high-cost areas.
What Are The Factors Impacting Conforming Loan Limits?
Jumbo home loan limits are updated on an annual basis, with the new limits typically being announced in late November, but taking effect on January 1st of the following year.
There are multiple factors that play a role when it comes to determining the new limits for conforming loans:
Housing Market Trends
One key factor that plays a role in determining jumbo loan home limits are the housing market trends.
On one hand, higher median home prices in a specific region lead to higher conforming loan limits to accommodate the local market; if the median home price increases, the FHFA may raise the limits as well.
This is done to ensure that you can finance a home without resorting to jumbo loans, which have more stringent criteria.
The availability of properties on the market also has an impact on the loan limits. If the supply is limited but demand is strong, the prices will increase, which will also lead to an increase in jumbo loan home limits.
Economic Conditions
Another factor that impacts conforming loan limits are economic conditions, such as inflation, employment rates, economic downturns, and interest rates.
Inflation can drive them up because it tends to increase construction costs and home prices, which prompts an adjustment. However, economic downturns can put a strain on the housing market, which may keep loan limits stable or even reduce them.
Other factors – such as higher employment rates and low-interest rates – can boost home-buying activity, which can increase demand and lead to an increase of jumbo loan home limits. Conversely, lower employment rates and higher interest rates can have the opposite effect.
Federal Housing Finance Agency (FHFA) Policies
Jumbo loan home limits are mainly impacted by the Federal Housing Finance Agency (FHFA) Policies – as we mentioned earlier, the FHFA conducts an annual review, which involves analyzing changes in average home prices and economic conditions nationwide.
Significant changes in the Housing Price Index (HPI) can lead to adjustments to the conforming loan limits.
Regional Factors
Earlier in the article, we discussed the difference in conforming loan limits between regular areas and high-cost areas, which is an essential factor in determining the final numbers across the country.
High-cost areas have higher jumbo loan home limits, while the rest of the US regions have a lower baseline since the median home prices are lower. Urban and rural areas also matter; urban ones typically have higher housing costs, therefore higher conforming loan limits as well.
Government Policies
Jumbo home loan limits can also be impacted by government policies and legislation. For example, if the government introduces policies to promote affordable housing, this can cause an adjustment in the conforming loan limits in order to encourage lending.
This can happen especially during periods of poor economic growth, when the government can introduce measures to stimulate the housing market.
Why Is It Important to Set Conforming Loan Limits?
Setting conforming home loan limits is essential for maintaining stability in the US market – here are some of the main reasons why they are very important:
Set standardized practices – jumbo home loan limits help establish standardized mortgage underwriting practices nationwide, ensuring that loans meet specific criteria – which stabilizes the mortgage market.
Reduce risk for lenders – because conforming loans meet the stringent criteria set by Fannie Mae and Freddie Mac, they have a lower risk profile, which reduces the risk of default and encourages lenders to offer more loans.
Encourage homeownership – since the FHFA sets limits that align with the local housing markets, borrowers can access more affordable financing through conventional loans and other types of loans, which encourages homeownership.
Ensure compliance – conforming loan limits also serve to protect borrowers from predatory practices, as they align with broader government policies and regulations to promote responsible lending and homeownership.
Align with market changes – jumbo home loan limits are reviewed and adjusted annually to reflect the changes in the housing market and economy, staying up to date with the housing prices.
Are Conforming Loan Limits The Same Across All Lenders?
Yes, conforming loan limits are the sameacross all lenders in the sense that they are set by the Federal Housing Finance Agency (FHFA) and apply uniformly to all lenders nationwide.
These limits represent the maximum loan amount that Fannie Mae and Freddie Mac can purchase or guarantee, and they are updated annually based on changes in the housing market.
However, while the conforming loan limits themselves are consistent, individual lenders may have different policies or underwriting criteria that affect how they apply these limits.
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What is the difference between conforming and non-conforming loans?
Conforming loans adhere to the guidelines set by Fannie Mae and Freddie Mac, including loan limits, credit score, and debt-to-income ratio requirements, making them eligible for purchase by these agencies.
Non-conforming loans do not meet these criteria and include jumbo loans, which exceed conforming loan limits, and loans for borrowers with unique financial situations, leading to higher interest rates and stricter terms.
Can conforming loan limits change within the same year?
Conforming loan limits are typically set by the FHFA and updated annually, becoming effective on January 1st. They generally remain constant throughout the year.
However, they can change within the same year under special circumstances, such as significant economic shifts or legislative actions, but this is rare. Adjustments within a year aim to address market volatility or housing affordability issues.
What happens if my loan exceeds the conforming loan limit?
If your loan exceeds the conforming loan limit, it becomes a jumbo loan, which is not eligible for purchase by Fannie Mae or Freddie Mac.
As a result, jumbo loans often have stricter credit requirements, higher interest rates, and larger down payment requirements compared to conforming loans. Lenders consider them riskier due to the larger loan amounts, leading to more stringent underwriting standards.
Can conforming loan limits affect my ability to refinance?
Yes, conforming loan limits can affect your ability to refinance. If your existing mortgage balance exceeds these limits, refinancing into a conforming loan might not be possible, pushing you into a jumbo loan with stricter requirements and potentially higher interest rates.
Conversely, if your loan balance is below the limit, you may benefit from lower rates and easier qualification criteria, enhancing refinancing opportunities.
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