Since home values increased to levels that have never been seen before, it is fitting that the Federal Housing Finance Agency (FHFA) has decided to increase new loan limits by the largest percentage ever. The FHFA’s increase was determined by the House Price Index for the third quarter of 2021 compared to the third quarter of 2020, where the national average price increase was 18.05%.

Let’s take a look at the new loan limits and what they mean for homebuyers.

The New Loan Limits

Homebuyers should be happy to see that conforming loan limits have increased significantly. The new loan limits are as follows:

  • $647,200 for regular one-unit loans (increased from $548,250 in 2021)
  • $970,800 for one-unit high-balance loans (increased from $822,375 in 2021)
  • $1,243,050 for two-unit high-balance loans (increased from $1,053,000 in 2021)

Something else that is interesting is that by law, once the FHFA sets the loan limits, they cannot be reduced. That means these limits are here to stay even if the housing market were to experience a dip in prices.

How Do Loan Limits Work?

The Housing and Economic Recovery Act of 2008 created the FHFA who sets conforming loan limits by county. Most counties will fall in line with the FHFA’s national restrictions, which are based on the House Price Index report. There are only four counties where the baseline loan limit did not increase this year, which shows that the dramatic increase in home values is not limited to a particular area. Instead, the entire country is experiencing this unprecedented real estate market.

Historically, the FHFA has increased the loan limit each time home values have increased. Doing this keeps the real estate market moving forward, and ultimately this increase combined with the low inventory most of the country is struggling with could lead to home values increasing even more.

What Does This Mean For Homebuyers?

Many homebuyers around the country discovered that the existing loan limits were simply not enough to allow them to purchase a home. This led to frustration, and homebuyers felt like they were missing out. Interest rates are low, and all signs point to home values continuing to rise, which means getting into a house sooner than later is essential.

Now, thanks to this increase, a larger group of homebuyers will be able to take out a loan without attempting to access a jumbo loan. Jumbo loans do not have limits, but they are much more challenging to qualify for.

Ready To Get Moving?

Give us a call if you’d like to get the home buying process started and take advantage of the new loan limit increase while interest rates are still low.

We are here to help you from loan application to final approval. Our team will be happy to answer any questions you may have along the way and help you make the biggest purchase of your life.

*Even if you’ve locked in your rate, it can still be adjusted to the new loan limit and still close this year. But you need to act quickly. 


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