Prospective home buyers shopping around for conforming, conventional and FHA loans in 2014 will find only a few changes in loan limits compared to last year. For the most part, the limits—which set the maximum allowable loan size for a mortgage in a given geographical area—remain at 2013 levels, other than a few adjustments up or down in some high-cost regions.
For the ninth consecutive year, baseline conforming loan limits will remain at their current levels in 2014.
The term “conforming loan” refers to whether a loan product meets guidelines put into place by Fannie Mae and Freddie Mac. After being raised to $417,000 for single-family homes back in 2006, baseline conforming loan limits have remained steady, even as home values dropped across the country.
Baseline conforming loan limits for 2014 remain:
In 2009, conforming loan limits were first raised for a few areas designated as “high-cost” regions, where the median home sale price easily surpassed the national average. There are currently more than 200 areas nationwide that have been designated high-cost areas, including the metropolitan areas of New York City, Los Angeles and San Francisco.
High-cost area loan limits have increased in 2014 for 18 counties due to a high-cost area adjustment or new designation as a high-cost area. Currently, conforming loan limits in high-cost areas within the contiguous United States max out at:
However, maximum loan limits are even higher in Alaska, Hawaii, Guam and the U.S. Virgin Islands. While no counties will see a decline in conforming loan limits for 2014, among the several counties where borrowers can take advantage of an increase, are two counties in Virginia, three counties in New York and five in Massachusetts.
Several lesser-known metropolitan areas have also seen the conforming loan limit raised for 2014, including Garfield, Colo., which will see loan limits climb all the way to $625,000. Among some of the other cities affected by the higher loan cap in the contiguous states are Boston; Newburgh, N.Y.; Poughkeepsie, N.Y.; and Culpeper County, Va.
The term “conventional loan” refers to loan products that are not backed by the government. Conventional loans may or may not be conforming loans, therefore. FHA and VA loans, by contrast, would be considered unconventional loans.
Each year, the Federal Housing Finance Agency (FHFA) publishes conforming loan limits, as explained above. These limits apply to all conventional mortgages delivered to Fannie Mae, including baseline loan limits and higher limits for high-cost geographical areas.
While you can get approved for a conventional loan that does not fit within the conforming loan limits, your lender would not be able to resell your nonconforming loan to Fannie Mae and would then be taking on greater risk. This is why most lenders adhere to these limits.
The Department of Housing and Urban Development (HUD) implemented new single-family loan limits for high-cost areas under the FHA loan program for 2014 as well.
While the standard loan limit for areas where housing costs remain relatively low will stay unchanged at $271,050, the new national maximum loan limit for the highest-cost areas has been reduced from $729,750 to $625,500, which mirrors conforming loan limits for single-family homes in most high-cost areas.
The reduction in loan limit impacts about 650 counties nationwide. Higher limits had been put into place due to the Economic Stimulus Act of 2008. This was done as an emergency solution to ensure mortgage credit remained available for borrowers at a time when private lending was severely constrained.
The new lower limits were set to take effect several years ago, but experienced several congressional delays in implementation. Loan limits for FHA-insured reverse mortgages remain unchanged, with a maximum claim amount of $625,000, dependent on property value, borrower age and current interest rates.
The minimum FHA national loan limit, known as the “floor,” is set at 65 percent of the national conforming loan limit, which is $417,000 for a single-family home, as noted above. This floor applies to areas where 115 percent of the median home price is less than 65 percent of the national conforming loan limit.
Current FHA loan limits for low-cost areas, or the floor, for FHA loans are:
Maximum loan amounts for the FHA program for high-cost areas, also known as the FHA loan ceiling, are: