Affordability remains the key issue in the housing market following years of record home price appreciation and sustained high mortgage rates. Increasing loan limits are one lever that can be pulled to help reenergize home buyers and make financing easier in today’s market. After nearly all counties seeing increases this year, over 84% will start 2024 with higher Federal Housing Finance Agency (FHFA) and Federal Housing Administration (FHA) loan limits than 2023.
FHFA and FHA are two popular loan providers for those purchasing a home with a mortgage. These loans have different rates, insurers, credit standards, and loan limits.
- Conforming loans. The FHFA, which was created as a part of the Housing and Economic Recovery Act of 2008, shows the dollar amount of mortgages that can be acquired by Fannie Mae and Freddie Mac. These loans are commonly called “conforming” as they need to meet specific requirements laid out by Fannie Mae and Freddie Mac. These loans, for example, require a higher credit score, larger down payment, and lower debt-to-income ratios to qualify than other loan options available.
- FHA loans. FHA loans are primarily utilized by home buyers who may not have otherwise been able to receive a mortgage in the conventional market for one reason or another. These loans are guaranteed by the FHA, and they allow buyers who have a lesser down payment or lower credit scores to qualify.
According to the Mortgage Bankers Association, conventional loans made up 73.4% of total loan applications in late November. Conventional loans include conforming loans but also other types, like jumbo. FHA loans represented just 13.5% of activity.
The FHFA established the national conforming limit at $766,500 for 2024, adjusting the floor by the 6% price appreciation seen over the past year. For high-cost areas, locations in which 115% of the local median home value exceeds the baseline conforming loan limit, the applicable loan limit will be higher than the baseline loan limit. The conforming ceiling for 2024 is $1,149,825, a record high.
The FHA also sets a ceiling and floor each year for the loan limits based on median home prices. Like conforming loans, the new ceiling of $1,149,825 is 6% higher than the $1,089,300 from last year. Loans in the traditionally expensive metros, such as Los Angeles, New York, and San Francisco, are subject to the revised ceiling.
The new floor of $498,257 is seen in housing markets like Orlando, Florida; Charlotte, North Carolina; and Houston. Over 87% of all counties received the minimum limit, in line with last year.
Among major markets, the new loan limits increased the most in counties in Columbus, Ohio, and Miami, up 12% and 11%, respectively. Other notable increases include select counties in Montana, North Carolina, and Colorado. In some markets, though, the dramatic increase still lags the run-up in prices seen over the last several years.
Below you’ll find the revised FHFA and FHA loan limits for select markets across the country.
The impact on the new-home market varies by metro, but most will see a net benefit.
- Under the new conforming loans, Stockton, California; Baltimore; and Greeley, Colorado, were the major metros benefiting the most, with projects falling under the FHFA loans all rising at least 6%. Collin County in Dallas was the biggest increase on the county level, adding 11 projects.
- Given the higher floor, more projects naturally fall under the conforming limit. Over 85% of Zonda’s actively selling projects have minimum asking prices below the FHFA floor, totaling over 12,000 projects.
The change is the FHA loan limits should have a more pronounced impact on the new-home market, depending on location.
- Like with conforming loans, new-home communities in Collin County in Dallas are the biggest winners under the new 2024 FHA criteria. The increase may provide a welcome boost in the market.
- Looking on a CBSA level, Dallas gained the most volume of new-home communities that now fall within the new limits for the second straight year. The metro has 47 active projects that contain a minimum price under the limit.
- Among major metros, Columbus gained the most on a percentage basis, increasing the market’s projects under FHA count by 17%. Other major metros with large percent gains were Port St. Lucie, Florida; Salisbury, Maryland; and Cleveland.
- After four straight years as the biggest benefiters, Maricopa County in Phoenix saw its limit stay unchanged from 2023.
