FHFA Conforming Limits are Increasing. Help Your Clients Borrow Bigger

For the first time in a decade, the Federal Housing Finance Agency (FHFA) has announced an increased borrowing limit for conforming loans. As a reminder, a conforming loan meets the guidelines for a mortgage to be acquired by Fannie Mae (FNMA) and Freddie Mac.


In 2017 the borrowing limit for single-family homes will be raised from $417,000 to $424,100 in most locations, with a jump to $636,150 in higher-cost areas.

Let’s explore the background and market factors that led to the increased borrowing limit:

  • The Housing and Economic Recovery Act of 2008 was designed to address the subprime mortgage crisis.
  • One tenet of that act was to establish a baseline loan limit of $417,000 for most of the United States, with higher levels in high-cost areas.
    • Locations where 115% of the local median home value exceeds the baseline load limit are considered to be “high-cost” areas.
  • The baseline limit could not increase until home prices return to pre-decline levels. The third quarter of 2007 was identified as the pre-decline point of reference.
  • The FHFA’s Home Price Index (HPI) for the third quarter of 2016 makes it “clear” that average home prices are above the pre-decline period in the third quarter of 2007.

Therefore, the FHFA is now able to increase the borrowing limits by 1.7% due to comparable increases in third quarter HPI value in the third quarter of 2016.

The bottom line…

In 2017, your qualified clients can secure a mortgage that’s approximately 1.7% higher than they could have during the last 10 years.

Typically, these borrowers would need to have a DTI of about 43% in order to qualify. If they don’t qualify for a conforming loan, then a conventional mortgage or other program may be a better fit. And for those clients looking at significantly larger loans, a jumbo loan may be the best option. Fortunately, Stearns has a full array of mortgage products to meet the needs of today’s homebuyers.


Housing Wire
Federal Housing Finance Agency
The Department of Housing & Urban Development



Top Broker Channels. Rep. no. 6M2016. Inside Mortgage Finance, June. 2016. Web. 15 Sept. 2016.

“The 2013 Inc. 5000.” The 2013 Inc. 5000., Aug. 2013. Web. 18 Mar. 2015.
“The 2014 Inc. 5000.” The 2014 Inc. 5000., Aug. 2014. Web. 18 Mar. 2015.
“The 2015 Inc. 5000.” The 2015 Inc. 5000., Aug. 2015. Web. 18 Aug. 2015.

- By Michael Kearney, Dec 12, 2016