A woman uses a calculator while looking at loan application documents.

Rising home prices push up Fannie Mae, Freddie Mac loan limits 

The 5.5% increase for 2024 “seems like a pretty good indication,” that the Federal Housing Finance Agency expects home prices to keep increasing.

November 28, 2023
2 minutes

With home prices continuing to rise, the Federal Housing Finance Agency has increased the conforming loan limits for Fannie Mae and Freddie Mac by 5.5%, a move that will allow for more financing options for borrowers.

The details: On Jan. 1 the loan limit for most Fannie Mae and Freddie Mac loans will be $766,550, an increase of $40,350 from 2023. In high cost areas, the limit will be $1,149,825.

"The FHFA also noted that conforming loan limits were going up in all but 5 counties across the country, which seems like a pretty good indication that it expects home prices to continue to rise in 2024," said Rick Sharga in a LinkedIn post. Sharga is the founder of CJ Patrick Company, which specializes in market intelligence for companies in the real estate and mortgage industries.

Why is it going up now? This is not a special action: The FHFA considers adjustments every year at this time. It sets the limits based on the third quarter of its index, which came out on Nov. 28 and showed a 5.5% year-over-year increase in home appreciation. According to its rules, the FHFA will not lower the limit if home prices go down year-over-year.

Impact: The increase in loan limits can give potential home buyers flexibility when buying a home, providing the opportunity to qualify for a bigger home without having to go through the more challenging non-conforming jumbo loan process.

The increased limits also help homeowners, who can access more equity through a cash-out refinance loan.

One downside to increased limits is a higher risk of defaults if homebuyers borrow more than they can afford. That increased risk is even higher in this environment of elevated mortgage interest rates.

Get the latest real estate news delivered to your inbox.