2024 Conforming Loan Size Limit Increase

In anticipation of the changing economic landscape and evolving real estate market, 2024 brings with it a significant shift in the conforming loan size limits. These limits, determined by federal authorities, play a pivotal role in defining the accessibility and affordability of mortgages for aspiring homeowners. As we delve into the details of the 2024 conforming loan size limit increase, it becomes evident that this adjustment holds the potential to reshape the housing market and empower a broader range of buyers.

What is a Conforming Loan Size Limit and Who Sets It?

The Federal Housing Finance Agency (FHFA) oversees Fannie Mae and Freddie Mac and is responsible for annually adjusting the conforming loan limits based on changes in home prices and costs of living in different areas. These limits help maintain the balance between providing affordable financing and preventing excessive risk in the mortgage market.

Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are critical players in the mortgage market and were established by the federal government to provide stability and liquidity to the housing market. Fannie Mae and Freddie Mac buy mortgages from lenders, package them into mortgage-backed securities, and sell them to investors. To ensure that the loans they purchase are within certain boundaries, these agencies establish conforming loan limits.

So what is the 2024 conforming size limit?

The 2024 conforming mortgage size limit is $766,550, an increase of $40,350 from the 2023 limit.

How Does the Loan Size Limit Increase Benefit You?

An increase in the conforming loan size limit can benefit you in several ways:

• Access to Lower Interest Rates and costs: Conforming loans often come with lower interest rates and costs compared to non-conforming (jumbo) loans. As the loan size limit increases, more borrowers may fall within the conforming loan range, allowing them to access these lower interest rates. This can result in significant savings over the life of the loan.
• Lower Down Payment Requirements: Conforming loans typically have more favorable down payment requirements. If the loan limit increases, more borrowers may be eligible for loans with lower down payment percentages, making homeownership more financially accessible.
• Easier Qualification: Conforming loans generally have more lenient qualification criteria compared to jumbo loans. As the loan size limit increases, more borrowers may find it easier to qualify for conforming loans, expanding the pool of individuals who can secure affordable financing.
• Increased Affordability: With a higher loan size limit, more homes may fall within the range of conforming loan amounts. This can make a broader range of properties financially feasible for homebuyers, potentially expanding their choices in the housing market.
• Market Stability: The establishment of conforming loan limits contributes to overall stability in the housing market. By preventing excessive risk-taking and standardizing lending practices, these limits help maintain a healthier and more predictable housing market environment.
• Standardized Terms: Conforming loans often come with standardized terms and conditions, providing borrowers with consistency and predictability. If the loan size limit increases, more borrowers can benefit from these standardized terms, making the mortgage process more transparent and understandable.
• Selling and Refinancing: If you plan to sell your home or refinance your mortgage, conforming loan limits can impact the pool of potential buyers or refinancing options. Homes with conforming loans may attract a larger number of buyers, and refinancing within these limits can offer more favorable terms.

How does Conforming Loan Limit Vary by Area?

The conforming loan limit varies by area based on regional housing market conditions. Here’s how the variation works:

• High-Cost Areas: In regions where the cost of living and home prices are higher, the conforming loan limits are set at a higher level to reflect the increased cost of housing. High-cost areas are typically metropolitan areas with more expensive real estate markets.
• Standard Areas: In areas where home prices are more moderate, the conforming loan limits are set at a standard level. These limits are designed to accommodate the majority of housing markets across the country.
• Special Exceptions: Some areas, like Alaska, Hawaii, Guam, and the U.S. Virgin Islands, have higher conforming loan limits than the standard areas due to unique housing market conditions. These special exceptions recognize the higher costs associated with real estate in these locations.

It is important for homebuyers and lenders to be aware of the limits applicable to their specific location because they directly impact the maximum loan amount that can be considered conforming in that area.

What if my Loan is Larger than the Conforming Size Limit?

If your loan amount exceeds the conforming size limit, your mortgage is considered a non-conforming loan, often referred to as a jumbo loan. Here are some key considerations if your loan is larger than the conforming size limit:

1. Interest Rates: Jumbo loans typically have higher interest rates compared to conforming loans. Lenders may charge a premium to compensate for the increased risk associated with larger loan amounts.
2. Down Payment: Jumbo loans often require a larger down payment compared to conforming loans. Lenders may ask for a higher percentage of the home’s purchase price as a down payment to mitigate the increased risk.
3. Stricter Qualification Requirements: Lenders may impose more stringent qualification criteria for jumbo loans. This could include higher credit score requirements, lower debt-to-income ratios, and additional documentation to demonstrate financial stability.
4. Limited Availability: Since jumbo loans carry higher risk for lenders and are not eligible for purchase by government-sponsored entities like Fannie Mae and Freddie Mac, they may be less readily available. You might need to explore options with specialized lenders who specialize in jumbo financing.
5. Market Conditions: Jumbo loans can be more sensitive to changes in economic conditions and interest rates. Market fluctuations may have a more pronounced impact on the terms and availability of jumbo financing.

Bottom Line

The bottom line is that an increase in the conforming loan size limit can potentially benefit borrowers in terms of lower interest rates, reduced costs, easier qualification, and overall loan terms. This expansion of loan limits may make homeownership more affordable and refinancing more accessible for a broader range of individuals. However, the specific advantages depend on individual financial circumstances, the local real estate market, prevailing interest rates, and the terms of the loan you qualify for.

If considering a home purchase or refinancing, please reach out to me for additional guidance on 2024 conforming loan size limits in your area at 312-296-4175 or email me at connect@borislending.com. I lend in all 50 states and I am never too busy for your referrals!!

Boris Cherner

I have been in the mortgage industry since 1997 and I understand the anxiety that comes with making the most expensive investment of a lifetime. My objective is to be your advisor, to educate you and to make the mortgage loan transaction as transparent and as stress-free as possible. I enjoy establishing personal connections and work mostly by referral. I thoroughly explain the process and available options, and guide my clients to make choices that best fit their needs and financial goals. Once the underwriting begins I communicate regularly and keep my clients apprised of the loan status from the beginning through the end. My relationship with clients does not end at the closing table. You are my client for life and I am always available to answer your questions and provide you with guidance.