As we get closer to the new year, one thing we always want to take a look at is conforming loan limits. Every year since 2016, the Federal Housing Finance Agency (FHFA) has raised the maximum conforming loan limits on Fannie Mae and Freddie Mac backed mortgage loans.

Record Highs

In most of the United States, the new maximum conforming loan limit will be raised to $510,400. This is the first time that amount will top $500,000. However, the max varies from state to state and county to county. Being that median home prices are so much higher here in Southern California, we actually have higher maximum conforming loan limits.

For 2020, we’ll see the FHFA maximum conforming loan limits go up in Southern California:

  • San Diego County – $701,500
  • Los Angeles County – $765,600
  • Orange County – $765,600

For a full U.S. map of 2020 conforming loan limits, click here.

There was a 10-year period between 2006 and 2016 (during the housing crisis) when the FHFA did not raise the maximum conforming loan limit at all. However, each year the base amount has gone up in most U.S. counties by an average of $93,400, with even higher annual increases in high-value counties like ours.

How Are Conforming Loan Limits Set?

The conforming loan limits for Fannie Mae and Freddie Mac are determined by the Housing and Economic Recovery Act of 2008. That was when the housing crisis was at its worst, so the FHFA set the baseline loan limit at $417,000. The act ensured that limit would not be able to be raised again until home prices returned to at least pre-decline levels. These past four years have seen home prices keep rising dramatically, which has forced the hand of the FHFA to continue raising the conforming loan limits each year.

The amount was pretty easy to determine. Data shows that home values increased by an average of 5.83% between the third quarter of 2018 and the third quarter of 2019. In turn, the 2020 conforming loan limits will be raised by the same percentage. Similar calculations were made to determine increases in high-value areas such as Southern California.

Setting Your Own Limits

What this ultimately means is that people seeking mortgage loans backed by Fannie Mae or Freddie Mac will be able to borrow more in 2020 than they were able to in 2019. It will open up opportunities for more home buyers and provide more options for mortgage lenders. However, just because the loan limits go up doesn’t mean you should ever borrow more than you need to. Too many people getting mortgage loans beyond what they could afford is the main reason we had the housing crisis in the first place.

No matter what you are looking to buy or where you are planning to purchase a home, it’s important to make smart mortgage decisions. The team at Transparent Mortgage is here to help guide you through the process and get approved for a mortgage loan that suits your needs. Call us today at (619) 701-3906 or contact us online to get started on your loan pre-approval process.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.