Nov 30 2022

Introducing higher Conforming Loan limits


The Federal Housing Finance Agency (FHFA) just raised its 2023 Conforming Loan limits to $726,200.

Conforming Loan limits have increased by roughly 12 percent—from $647,200 to $726,200—for one-unit properties in most parts of the U.S. This change gives homebuyers purchasing within this price range the opportunity to qualify for a Conforming Loan instead of a Jumbo. A Conforming Loan typically comes with a lower rate and a smaller down payment.

Conforming Loan limits will also increase from $970,800 to $1,089,300 in Hawaii and Alaska. Purchase, rate-and-term refinance, and cash-out refinance are all permitted under these new limits. Conforming limits may also be higher in high-cost areas. You can view 2023 Conforming limits by county here.

Why the increase? Loan limits typically rise in response to housing market growth, ensuring that homebuyers continue to have access to affordable mortgage products. The FHFA usually updates its monetary Conforming Loan limits each year based on the results of its House Price Index (HPI) report, which reflects how much annual home prices have appreciated.

Here’s what to know about higher Conforming limits

Right now, a buyer considering a $726,000 property may still be eligible for a Conforming Loan, which may have a more competitive rate and less restrictive guidelines than a Jumbo Loan.

When a loan is Conforming, it meets GSE (Government Sponsored Enterprise) lending guidelines set in place by Fannie Mae and Freddie Mac. A Non-Conforming Loan, like a Jumbo Loan, doesn’t conform to Fannie Mae/Freddie Mac guidelines and may have more stringent qualification and down payment requirements. All home loans fall into one of these two categories.

A Conforming Loan is often used interchangeably with a Conventional Loan. While they’re not one and the same, there are many similarities between the two. All Conforming Mortgages are Conventional, but not all Conventional Mortgages are categorized as Conforming. Your Loan Officer can explain the subtle differences.

Use our Loan Decision Tool to find out which loan is right for you.

So, what does this mean if you’re a homebuyer?

  • Your purchasing power could increase. As loan limits increase so does your buying power. Higher Conforming limits allow you to borrow more without crossing over into Jumbo Loan territory. Jumbo Loans can come with more restrictions, higher down payments, and even higher interest rates.
  • You could now buy in a higher-cost area. Sometimes, homebuyers find that Conforming Loan limits aren’t high enough to compete in pricier parts of the country. This is the reason that limits have once again increased. You may now have more listings to choose from that are on par with the typically priced houses in your area.
  • You may need less cash to close. Your down payment makes up a significant portion of your cash to close, along with closing costs, taxes, and other fees and charges. With the new Conforming limits, a down payment may be much lower than when borrowing with a Jumbo Loan—freeing up extra funds for other important things, like moving and furnishing your new house.

Remember: Larger limits help homeowners and homebuyers. When limits increase, it enables homebuyers to stay in step with rising housing prices. The potential for a lower down payment at a higher price point may make the market more affordable to more buyers. Homeowners interested in a cash-out refinance may also have access to more funds, based on their current equity levels and up to the amount of the new loan limits.

Could these new Conforming limits make it easier to buy a house?

Or would another loan program provide you with more savings? At Academy Mortgage, we take an individualized approach to homeownership; there are no cookie-cutter solutions. Contact your local Academy Loan Officer to find out which loan may offer you the most benefits.

All mortgage products are subject to credit and property approval. Rates, program terms, and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Additional conditions, qualifications, and restrictions may apply. Please contact Academy Mortgage for more information.