Every year about this time the FHFA (Federal Housing Finance Authority) announces new conforming loan limits. These limits define the maximum amount of the initial principal balance of a loan that Fannie Mae and Freddie Mac will purchase from mortgage lenders.
Historically conforming loan limits were raised a little each year, and reflected the increase in the median home price across the nation. After the financial meltdown in 2008, however, the conforming loan limits did not go down in line with dropping median home prices, acknowledging that non-government-backed lending had almost disappeared, and reducing the conforming loan limit would seriously damage the housing market further.
As a result, the conforming loan limit has remained the same ever since, at $417,000.
In addition, recognizing that loans above that limit were hard to source, the agencies created a new category of loans that they would buy for the first time in history – High-Balance Conforming Loans. This limit was set at 125% of the median home price in any county, with a maximum loan amount of $729,950, which was later reduced to $625,000. This is important because the high-balance conforming loan was meant to be a temporary measure to support the housing market in high-cost areas, but it was codified in the 2008 Housing and Economic Recovery Act.
Today the FHFA announced conforming loan limits for 2015. The conforming loan limit will remain at $417,000, and the high-balance conforming loan limit will remain where it is as well. To look up the high-balance conforming loan limits by county, click here. In the Bay Area I’ll save you the trouble – we’re at the top, $625,500.