Fannie Mae and Freddie Mac will be able to buy larger mortgages next year.
The Federal Housing Finance Agency annually adjusts conforming mortgage loan limits based on average home-selling prices. Nationwide, the conforming limit will top $500,000 for the first time.
As of January, the conforming mortgage loan limit will go from $484,350 to $510,400.
In cities deemed as high-cost markets, including the D.C. area, the conforming loan limit will go from $726,525 to $765,600.
Historically, conforming loans have generally meant better loan terms for borrowers. But nonconforming loans, those bought and held or sold between banks and private lenders, have had rates on par or even a bit lower than conforming loan rates for the past several years.
FHFA publishes a House Price Index report each quarter and uses third quarter data to set conforming limits each year. This year’s third quarter report posted a 5.38% increase in average home prices across the country between the third quarter of 2018 and 2019.
That is the percentage used for the increased conforming limits.
The D.C. area is among metros where at least 115% of the local median home value exceeds the baseline conforming loan limit.
Based on FHFA’s Home Price Index, conforming loan limits will be higher in 2020 in all but 43 counties or county equivalents.