For most U.S. cities, the conforming loan limit for a single-family property will remain at $417,000. Only nine metro areas, including Denver, Boston and Nashville, will get higher limits for 2016.
Last week, the maximum conforming loan limits for 2016 were announced. According to the Federal Housing Finance Agency (FHFA), the maximum conforming size for mortgage loans purchased by Freddie Mac and Fannie will stay at current levels — except for in 39 “high-cost” counties where they’ll increase.
So, for most cities across the U.S., the 2016 conforming loan limits will be identical to those used in 2015. They’ll simply “roll over” unchanged.
This came as a surprise to many housing analysts. Home prices rose significantly in many U.S. cities over the last year, and such trends usually prompt the FHFA to increase the conforming loan limits. After all, higher price tags require larger loans for home buyers. But that didn’t happen. Instead, FHFA officials decided the current baseline loan limit of $417,000 will suffice in 2016.
Baseline Conforming Loan Limit for 2016: $417,000
As mentioned earlier, the baseline conforming loan limit for is set at $417,000. But these caps vary from one county to the next. To find next year’s limits for your area, you can download the complete PDF or Excel files available on LoanLimits.org. (The publishers of the Home Buying Institute created this website as a tool of convenience for mortgage shoppers.) The full PDF is also available at FHFA.gov.
Here are the “floor” or baseline conforming loan limits for 2016:
- One-unit home: $417,000
- Two-unit home: $533,850
- Three-unit home: $645,300
- Four-unit home: $801,950
Notes: Limits vary by county, so the baseline figures above might not apply to your area. In this context, “one unit” refers to a single-family home, “two unit” refers to a duplex-style property with two separate resident living in it, etc.
Nine Metro Areas Where Limits Are Going Up
While most home buyers and mortgage shoppers will encounter the same conforming loan limits in 2016, there are a handful of metropolitan areas where the caps will go up next year (Happy Holidays!). Specifically, there are 39 high-cost counties spread over nine metro areas where the caps will rise next year.
Loan limits will increase in 2016 for the following metro areas:
- Boston, MA
- Boulder, CO
- Denver, CO
- Napa, CA
- Nashville, TN
- Salinas, CA
- San Diego, CA
- Santa Rosa, CA
- Seattle, WA
Most of these areas have something in common. Home prices in most of these real estate markets have risen to pre-crisis levels or above. In other words, houses are currently more expensive now than they were during the housing bubble of the early 2000s.
This is the trigger that causes FHFA to increase conforming loan limits for a particular area, and it’s clearly spelled out in the Housing and Economic Recovery Act of 2008 (HERA). That act set the baseline loan limit at $417,000 and mandated that, “after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.”
In Denver and Boston, for example, home prices are now higher than the peaks reached during the housing bubble of the early to mid 2000s. So the 2016 conforming caps were increased for these markets to reflect the “new normal.” Over the last year, house prices have risen in all of the metro areas listed above, albeit to varying degrees.
Price Gains Alone Not Enough to Warrant Increase
While many U.S. cities experienced price gains over the last year, only the metro areas shown above will see higher loan limits in 2016. According to FHFA:
“Although other counties [across the country] also experienced home value increases in 2015, after other elements of the HERA formula — such as the statutory ceiling and floor on limits — were accounted for, these local-area limits were left unchanged.”
Jumbo Mortgage Products Still Available
To be clear, there are financing options available for home buyers who need to borrow more than the above-stated limits. They’re called jumbo loans. These are mortgage products that exceed the conforming limits for Freddie Mac and Fannie Mae. Jumbo mortgage products, while harder to come by, are still very much in use these days.
In fact, it appears to be getting easier to qualify for a jumbo product. While mortgage lenders typically set higher standards for borrowers seeking an “over-sized” mortgage, there appears to be some easing within the market. We reported on this earlier this year. Additionally, there are plenty of “non-bank” lenders out there competing for jumbo business.
So there you have them, the new (and mostly unchanged) maximum conforming loan limits for 2016. For most counties in the U.S., the current caps will carry over into the new year. Mortgage shoppers in the nine metro areas above will enjoy higher caps. The Federal Housing Finance Agency has set up a specific email address for people with questions about the conforming limits. Questions can be sent to LoanLimitQuestions@fhfa.gov.