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Conforming Mortgage Limits Rise for 2017

The federal government is increasing the limit for conforming mortgages from $417,000 to $424,100 in most regions of the United States starting Jan. 1, 2017, the Federal Housing Finance Agency announced Wednesday—the first such increase since 2006.
The approximately 1.7 percent bump in the baseline conforming loan limit follows the Agency’s announcement that the average U.S. home price has returned to its pre-decline peak, which it hit in the third quarter of 2007. The FHFA bases the loan cap on its quarterly Housing Price Index, which gauges average single-family home prices. The index rose 1.5 percent during the third quarter of 2016 and is up 6.1 percent over the past year, enough to push it above its previous high point.
Conforming loan limits are significant because they apply to home loans that meet the underwriting guidelines of Fannie Mae or Freddie Mac, the government-sponsored entities that acquire mortgages from lenders and ensure a steady flow of money to the mortgage market. Interest rates for nonconforming, or jumbo mortgages, are generally higher than rates for loans that fall under the cap, and these types of mortgages can be more difficult to obtain.
National Association of Realtors President William Brown said, “Today’s conforming loan limit increase is a much-needed recognition of rising home prices in high-cost markets, and a help to first-time and lower-income borrowers looking to utilize an FHA mortgage. Credit remains tight, but this decision will help more qualified buyers address the hurdles and high costs standing between them and the dream of homeownership.”

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