As of 2020, Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) are backing larger loans. This year each of the agencies has loan limits that are now in effect and are higher than those in 2019.
The Federal Housing Finance Agency’s (FHFA) home price index is the determining factor in all of the agencies’ loan limits. The highest dollar amount the agencies will back on a mortgage reflects in the reported home prices. The index rose in 2019 and home prices were 5% over 2018’s reported home prices.
As of January 1, 2020, all three agencies are backing larger loan amounts. Fannie Mae and Freddie Mac are backing loans that exceed $510,000 and FHA is backing loans above $331,000.
Fannie Mae and Freddie Mac 2019’s level were $484,350 and now in 2020 it is $510,400. The loan limits for these agencies were factored by the Housing and Economic Recovery Act of 2008. This act allows a baseline loan limit of $417,000 which is mandated. Once a period of price declines happens, the baseline loan limit cannot increase again until the home prices return to the amount they were before the decline took place.
The housing market is strong and has been on a good path since 2016. The FHFA increased the loan limit in 2016 for the first time in 10 years and since then increased it $93,400 to its current amount. FHFA reported that home prices increased by 5.38% on average between the end of 2018 to the end of 2019.
The FHA loan limit has increase $17,000 in 2020 to $331,760 from 2019’s loan limit of $314,827.
The FHA limit can be different in different areas of the country. The FHA minimum national loan amount, called a floor, is 65% of the Fannie Mae and Freddie Mac loan limit. According to Housingwire.com, the floor applies to low-cost areas. These areas are counties where 115% of the median home price is less than the floor limit.
The floor can also affect high priced homes. Around 70 counties across the country have a median home price that exceeds the FHA loan limit floor making these areas high-price areas. The FHA loan limit for these areas has increased to $765,600 making it a $40,000 difference over the 2019’s total.
As for most counties across the United States, the FHA loan limit increased but that was not the case for 11 counties. Those where the FHA loan limit decreased were Dutchess County, New York; Orange County, New York; and Lincoln County, Idaho.
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