2020: New Year, New FHA Loan Limit

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The 2020 national conforming loan limit for Fannie Mae and Freddie Mac will be increasing from 2019’s $484,350 to $510,400; 115% of median home prices across the country.  Housing markets categorized as ‘high cost’ will rise to a limit of $765,600. The 2020 FHA loan limit is increasing by nearly $17,000 to $331,760 from $314,827, which is 65% of the conforming loan limit.

HERA, otherwise known as the Housing and Economic Recovery Act, requires that the conforming loan limit be evaluated every year to take into consideration the average U.S home price.  When prices increase, the loan limit increases respectively so that borrowers can qualify for higher loan amounts in order to afford higher home prices.  This, in turn, perpetuates the real estate market.

These limits don’t always increase- the reduction in loan amounts in year’s past have been set in motion to balance out the high volume of lending following the housing crisis in 2008.  Lowering the loan limit decreases government involvement in lending and increases bank involvement, which in turn can make it more costly to obtain private loans for borrowers.

Prices this year in Massachusetts, however, have been up every month over the same month in 2018, and the story isn’t much different across the country.  As of the end of July, prices for the first half of the year in Massachusetts were up almost four and a half percent over the first half of 2018, and the average for the year will perform similarly.

These loan limits are effective between January 1, 2020 and December 31, 2020.