U.S. Conforming Loan Limits Upped for First Time Since 2006

• For most U.S. counties (2,912 of 3,146 counties nationwide), the conforming loan limit is set to rise from $417,000 to $424,100 in 2017. The conforming loan limit is higher in certain counties identified as “high cost” counties.
• The increase represents the first nationwide increase of the baseline, default conforming loan limit since 2006 (when it increased to its current level from $359,650).
• In four counties – Solano County, California, and Lincoln, Logan and McPherson counties in Nebraska – the limit will move beyond the default for the first time in 2017, rising to $431,250 in Solano County and to $433,550 in the Nebraska counties.

A broader pool of U.S. mortgage borrowers will be able to access the more flexible terms of government-backed loans next year after the Federal Housing Finance Agency (FHFA) upped the national conforming loan limits for the first time in a decade, effective in 2017.

FHFA oversees broad swaths of the American mortgage market largely via its oversight of Fannie Mae and Freddie Mac (collectively known at the Government Sponsored Enterprises, or GSEs). The conforming loan limit is the maximum amount home buyers can borrow and still qualify for the flexible, often lower-cost, lending terms of loans sold to GSEs (which are, in turn, backed by the federal government). Loans above the conforming loan limit are known as jumbo loans and are not eligible for sale to the GSEs and the government-backing that implies, and so can be more expensive or require more stringent underwriting.

The bump in loan limits serves as a strong indicator of just how far the housing market has come since bottoming out five years ago. Home values are up nationwide, and Zillow expects them to grow at a steady 3.6 percent annual pace in 2017. In some particularly strong markets, homes are worth more now than they ever have been.

For most counties (2,912 of 3,146 counties nationwide), the conforming loan limit increased from $417,000 to $424,100, the first nationwide increase of the baseline, default conforming loan limit since 2006 (when it increased to its current level from $359,650). The conforming loan limit is higher in certain counties identified as “high cost” counties. In the highest-cost counties in the contiguous 48 states – including those in and around Boston, New York City, San Francisco, Los Angeles and Washington, D.C. – the conforming loan limit will increase from $625,500 to $636,150 (figure 1). Conforming loan limits are also higher in Alaska and Hawaii.

In four U.S. counties – Solano County, California, and Lincoln, Logan and McPherson counties in Nebraska – the conforming loan limit will move beyond the default limit for the first time in 2017, rising to $431,250 in Solano County and to $433,550 in the North Platte counties.

Historically, large coastal metros have accounted for the bulk of homes requiring jumbo loans. California, for example, is home to about 9 percent of the country’s housing stock, but 32 percent of the country’s homes that require a jumbo mortgage.

More recent Zillow data suggest that, given current conforming loan limits and home values, 53 percent of San Francisco homes, 26.2 percent of Los Angeles homes, 22.1 percent of San Diego homes and 17.6 percent of Seattle homes would require a jumbo loan – highest among the largest 25 U.S. metros. Among large markets, the smallest shares of homes requiring jumbo loans are in Pittsburgh (2.1 percent), Detroit (2.6 percent), St. Louis (3.1 percent) and Tampa (4.6 percent).