Mortgage Update: New Loan Limits for 2020

The Federal Housing Finance Agency (FHFA) is raising the baseline conforming loan limit for 2020, and we’re here to help you understand what this means! Laws restrict Fannie Mae and Freddie Mac to purchasing single-family mortgages with origination balances that are below a certain amount—this amount is known as the “conforming loan limit.” Read on for the reason behind this limit change, what these limits are in the Colorado counties we serve, and what the increase means for homebuyers.

Why has the limit been raised?

The limit increase is a response to significant gains in home values that occurred during 2019. According to FHFA’s seasonally adjusted, expanded-data HPI, house prices increased 5.38 percent, on average, between the third quarters of 2018 and 2019.* As home prices rise, the maximum loan limit needs to rise so homebuyers can borrow enough to cover the cost of their new home purchase. Raising the conforming loan limits for mortgages purchased by Fannie Mae and Freddie Mac reflects the continuing recovery of the U.S. housing market. In most counties across the country, the 2020 maximum conforming loan limit for a single-family home is $510,400. That’s an increase of $26,050 from the 2019 baseline limit of $484,350.

What it means in high-cost areas

High-cost areas are counties in which 115 percent of the local median home value exceeds the baseline conforming loan limit. In Colorado, that includes Boulder, Denver, Broomfield, Jefferson, Arapahoe, Douglas and Adams counties. In these areas, the loan limit is established as a multiple of the area median home value, while a “ceiling” of that limit is set at 150 percent of the baseline loan limit. Because median home values generally increased in high-cost areas in 2019, the ceiling loan limit in most high-cost areas for one-unit properties is raised to $765,600 for 2020 (or 150 percent of $510,400). Read on to see the limits in the Colorado counties we serve.

What it means for borrowers

Higher conforming loan limits are an “added value” to the consumer. It allows you to purchase a higher-priced home but keep your loan amount in a conforming loan limit that provides greater flexibility with underwriting guidelines and programs.

Below you’ll find a snapshot for the high balance conforming limit for one-unit properties in select counties.

What the new limits are in the Colorado counties we serve

Conforming New Limit One-Unit Property
All Counties (includes Larimer & Weld County) $510,400
Conforming – High Balance Limit One-Unit Property
Boulder County $644,000
Denver, Broomfield, Jefferson, Arapahoe, Douglas, & Adams County $575,000

Loans locked in December are still eligible when closed in in 2020 and if you’re looking to better understand loan limits as part of the homebuying process and want to find out more, please contact our mortgage team. We are here to help. You may also try our mortgage affordability calculators or sign up for a complimentary seminar.

*According to FHFA’s seasonally adjusted, expanded-data HPI.

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