FHFA hikes loan limits for 2018 in most of US

For the second year in a row, increasing home prices have led to a near-universal hike in FHFA conforming loan limits

FHFA hikes loan limits for 2018 in most of US
The Federal Housing Finance Agency (FHFA) is increasing conforming loan limits for the second year in a row.

The agency announced Tuesday that in most of the country, the maximum conforming loan limit for one-unit properties will be $453,100 for 2018. That’s a 6.8% increase from the 2017 limit of $424,100.

“As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2018 in all but 71 counties or county equivalents in the US,” the FHFA said in a statement.

The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit for Fannie Mae and Freddie Mac be adjusted each year in order to reflect changes in average home prices. According to the FHFA’s latest House Price Index (HPI) report, home prices rose an average of 6.8% between the third quarters of 2016 and 2017.

The loan limits will be higher in designated “high-cost” areas – markets in which 115% of the local medium home value exceeds the baseline conforming loan limit. HERA requires that the maximum loan limit in those areas be a multiple of the area’s median home value, with a ceiling set at 150% of the baseline limit. Median home values generally increased in high-cost areas this year, so the maximum loan limits in those areas will generally be rising in those areas as well. According to the FHFA, the loan limit for one-unit properties in most high-cost areas will be $679,650 for 2018.

There are special statutory provisions that establish different loan-limit calculations for Alaska, Hawaii, Guam and the US Virgin Islands, according to the FHFA. While the baseline loan limit in these areas will be $679,500, loan limits may be higher in some specific locations.

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