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What are the conforming loan limits for 2024?
If you’re shopping for your first home, you’re probably aware that your financial situation will impact how much you can borrow with a mortgage loan. But did you know that the type of mortgage you select will also help determine your maximum loan amount?
Many hopeful home buyers want to get a conforming mortgage. In 2024, most borrowers face a conforming loan limit of $766,550. However, the limit can vary depending on where you live and how many units are on your property. And don’t worry too much if you need to borrow more than conforming loans allow, because you still have options.
Read more: Everything you should know as a first-time home buyer
In this article:
What is a conforming loan?
Before we discuss the conforming loan limits (CLL), you should understand what a conforming loan is in the first place. A conforming loan is probably what you’d think of as a “regular mortgage.” It’s a type of conventional mortgage that adheres to Fannie Mae and Freddie Mac guidelines — including borrowing limits. Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) overseen by the Federal Housing Finance Agency (FHFA).
Mortgage lenders often originate conventional loans and then sell them to the GSEs to free up cash to underwrite more loans. Fannie Mae and Freddie Mac are legally barred from purchasing mortgages on single-family homes with origination balances over a set amount, or the conforming loan limit.
Ultimately, the GSEs package the loans they purchase into mortgage-backed securities (MBS), which are types of investments made up of many types of home loans. The GSEs either give MBS to the lender in exchange for the loans or sell the loans to investors. Investors like to buy conforming loans because they’re perceived as safe since they meet the GSE standards. In fact, for a fee, Fannie Mae and Freddie Mac will guarantee the principal and interest payments on the MBS they issue.
Baseline 2024 conforming loan limits
The FHFA, in accordance with the Housing and Economic Recovery Act of 2008 (HERA), updates the baseline loan limit each year to reflect the change in the average home price. The agency goes by the House Price Index (HPI), which measures the average price changes in repeat property sales or refinances bought or securitized by the GSEs.
The below values reflect the baseline CLL for all loans delivered to the GSEs in 2024 — even if the mortgage was issued before Jan. 1, 2024.
“The larger the loan, the larger the risk. [Limits are] supposed to help prevent overborrowing and foreclosures and to maintain market stability,” Anna Smith, senior mortgage loan officer at Movement Mortgage, said via email.
"For borrowers, if there is less risk in lending, obtaining financing should be, in theory, more attainable,” Smith said. “When there is less risk, typically less strict underwriting standards exist, lower interest rates happen, and overall easier lending practices happen.”
Yahoo note: A select few counties in the contiguous United States have higher maximum loan limits for conforming mortgages because they are high-cost areas. You can see the CLL in your county using the interactive map published by the FHFA.
History of conforming loan limits
The CLL is dynamic and shifts with housing market trends. In the early 1970s, the baseline limit was just $33,000.
Here’s a look at how it’s changed in the last decade:
Conforming mortgage loan limits were the same for the years 2006 to 2016, but the FHFA has increased them annually ever since.
"This means median home prices have continued to climb since then,” Smith said. “In years where housing prices remain stagnant or decrease, [the FHFA does] not lower the conforming loan limit.”
What happens if you need to borrow more than the conforming loan limit?
If your dream home costs more than the CLL, you have a couple of options. You could “... piggyback a smaller loan on top of the first lien to keep the main loan in the conforming limit and still finance what you need,” Smith said. “This means you may pay higher interest and fees on the smaller piggybacked loan, but you'll have a nice conforming loan otherwise.”
You could also apply for a jumbo loan, which is a conventional mortgage that exceeds the CLL. Securing a jumbo loan can help you buy the residence while only incurring one housing debt.
Qualifying for a jumbo loan might be harder than a conforming loan. “When lenders choose to lend over those loan amounts, they are risking more of their own money, as the [GSEs] are not insuring those funds,” Smith said. "Jumbo lending can often become more complex than conforming, as the institutions lending that money are often writing their own rules and regulations to manage their risk.”
As a result, you may need a higher credit score, down payment, and more than six months of cash reserves to be eligible for this type of financing.
However, it’s worth noting that more mortgage lenders tend to offer jumbo loans than piggyback loans.
Learn more: How much house can I afford? Use our free home affordability calculator.
Conforming loan limits 2024: FAQs
Should you borrow more than the conforming limit?
You may want to borrow more than the conforming limit if your target property costs more than that amount. However, you should ensure you can comfortably repay the larger debt before applying for a jumbo loan.
What is the difference between a conforming loan and a non-conforming loan?
A conforming loan is a conventional loan that complies with Fannie Mae and Freddie Mac standards. On the other hand, a non-conforming loan is a mortgage that doesn’t follow the GSE guidelines. A jumbo loan is one example of a non-conforming loan. Other examples are government home loans, including FHA, VA, and USDA loans.
Where can I find information about conforming loan limit values?
You can find the current (and historic) conforming loan limit values on the FHFA website. The agency publishes the upcoming year’s limits several weeks before they go into effect.
This article was published by Laura Grace Tarpley.
