The conforming loan limit for 2024 is $726,200 for most states and $1,089,300 for high-cost areas. A loan amount exceeding this leads to a non-conforming loan, which comes with stricter requirements and unique risks.
When youre thinking about buying a home, youll likely need a mortgage to help cover the cost. Conventional loans are a popular choice of mortgage. They offer flexibility in terms, competitive interest rates and dont require insurance premiums if you can make a sizable down payment. These loans can be further categorized into conforming and non-conforming types, each with its own set of loan limits.
Loan limits are the maximum amount you can borrow, and they vary based on whether the loan is conforming or non-conforming. Understanding these intricacies is important if you’re considering a mortgage. It can help you determine how much house you can afford, and may also affect the terms of your loan, including the interest rate. By understanding the 2023 loan limits for conforming and non-conforming conventional loans, youll be better equipped to make smarter choices about your mortgage options.
When getting a mortgage, it’s important to know the difference between conforming and non-conforming loans Loan limits, set by the Federal Housing Finance Agency (FHFA), determine if a loan conforms to guidelines for purchase by Fannie Mae and Freddie Mac Exceeding these thresholds means obtaining non-conforming jumbo financing. In this comprehensive guide, we’ll break down key details on conforming vs non-conforming loans, how limits are set, and what to know for 2023.
Conforming vs Non-Conforming Loan Limits
First let’s review the definitions
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Conforming loans – Mortgages that fall at or under limits set by the FHFA for the current year. For 2023, this includes loans up to $726,200 for single-family homes in most areas. Conforming loans can be purchased by Fannie Mae and Freddie Mac.
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Non-conforming/jumbo loans – Loans that exceed conforming loan limits. Also called jumbo loans. Cannot be purchased by Fannie Mae or Freddie Mac. Generally have higher rates and stricter requirements than conforming loans.
Keeping these limits in mind is key when determining loan eligibility and getting a mortgage rate quote.
How are Conforming Loan Limits Determined?
The FHFA is responsible for setting conforming loan limits each year. Their calculations factor in housing price trends and statutory requirements.
Limits typically adjust year to year based on the average home value movement over the previous year. FHFA analyzes national and regional housing data from various sources when setting the limits.
There are baseline and high-cost area conforming limits. High-cost areas like New York or San Francisco have expanded limits to account for higher home values.
Conforming Loan Limit Changes for 2023
For 2023, conforming loan limits increased across the board:
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Baseline limits rose from $647,200 in 2022 to $726,200 for single-family homes, a 12% increase.
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High-cost area limits jumped from $970,800 to $1,089,300, up 12% as well.
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The new ceilings match the maximum allowed by law.
These expanded limits reflect the rapid home price appreciation seen nationally in 2022. Higher limits let more homebuyers obtain conforming loan financing.
2023 Conforming Loan Limits by State
While limits jumped in all areas, keep in mind the actual conforming limit applicable to your county or metro area can vary. Here are some key 2023 conforming loan limit numbers by state:
California
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Baseline limit: $726,200
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High-cost counties include Los Angeles, Orange, Santa Clara, San Diego, San Francisco – $1,089,300 limit
Florida
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Baseline limit: $726,200
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High-cost counties include Monroe, Miami-Dade – $1,089,300 limit
New York
- New York City metro area and surrounding counties – $1,089,300 limit
Illinois
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Cook County/Chicago metro – $1,089,300 limit
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Most other counties – $726,200 baseline limit
Texas
- Baseline $726,200 limit statewide (no high-cost counties currently)
Ohio
- Baseline $726,200 limit statewide
Loan Limits for 2-4 Unit Properties
The conforming limits are higher for 2-to-4 unit properties:
| Property Type | 2023 Baseline Limit |
|---|---|
| 2-unit | $931,600 |
| 3-unit | $1,124,400 |
| 4-unit | $1,397,400 |
These amounts apply in most areas but can go up to 50% higher in high-cost regions like California and New York City metro.
How High Can Non-Conforming Jumbo Loans Go?
Once above the conforming limit, loan amounts for non-conforming jumbo loans don’t have a maximum by law. Limits are driven by each lender’s policies.
Many lenders cap jumbo loans around $3 million. But amounts of $5 million, $10 million, or more are possible depending on the lender, your financial profile, and the property.
Down payments of 10-20% are typical for jumbos. Requirements vary by lender.
Pros and Cons of Jumbo Loans
Non-conforming jumbo loans have unique trade-offs:
Pros
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Finance luxury homes or properties over conforming limits
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Potentially lower mortgage insurance
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Fixed rates and longer terms available
Cons
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Typically 0.25% – 0.5% higher rates than conforming
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Stricter credit score, income, and down payment rules
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Limit on number of properties you can own
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Difficult to obtain for investment properties
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Most ARMs have annual caps on rate increases
Overall, jumbos make sense for those who need to borrow above conforming limits and meet the heightened requirements. Shop multiple lenders to find the best rates and terms. Consider alternatives like two mortgages or a conforming HELOC.
Non-Conforming Loan Alternatives
Two options to keep costs lower on high-value homes:
1. Conforming First Mortgage + HELOC
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Obtain 80% LTV conforming loan for up to conforming limit
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Add 10-20% down to get to 20% overall equity
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Take out a home equity line of credit (HELOC) for remaining amount
2.Conforming First + Non-Conforming Second Mortgage
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Get a conforming first mortgage for up to the conforming limit
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Take out a smaller non-conforming second lien for the excess amount
Both allow you to access jumbo loan amounts while keeping better terms on the large conforming portion.
The Takeaway
Hopefully this breakdown gives you a solid grasp on conforming vs. non-conforming loans and how 2023 loan limits affect financing options. The expanded limits for 2023 make conforming loans accessible for more buyers. But jumbo loans still serve a purpose for luxury and high-cost properties. Talk to an experienced loan officer to map out the optimal loan strategy for your situation.
What Is a Non-Conforming Loan?
A non-conforming loan is a mortgage that doesnt meet the guidelines set by Fannie Mae and Freddie Mac. Understanding the ins and outs of non-conforming loans can open doors for you, especially if youre eyeing properties that exceed conforming loan limits. There are many reasons borrowers would go for a non-conforming loan. These include the following:
However, non-conforming loans come with their own set of challenges. Youll often face higher interest rates compared with conforming loans. It could mean significantly higher payments over the life of the loan, which could strain your finances. Youll also need a stellar credit score and a sizable down payment, as lenders view these loans as riskier. Additional costs can also creep in, such as higher fees or insurance premiums, making it crucial to read the fine print.
Non-conforming loans are suitable for exclusive or unique real estate ventures because they open doors to possibilities that might be closed off with conventional loan options. However, do your homework to fully understand the financial commitments and potential higher costs involved.
What Is a Conforming Loan?
A conforming loan is a type of mortgage that falls within the loan limits set by Fannie Mae and Freddie Mac, two government-sponsored entities that buy and secure mortgages. When these back a loan, a lender is more protected if the borrower fails to pay. That makes them less risky for lenders. Understanding the role of Fannie Mae and Freddie Mac can help you see why conforming loans often come with better terms and being aware of what a conforming loan is and how it differs from a non-conforming loan can guide you in making a choice that aligns with your financial goals.
Conforming loan limits are set guidelines on how much you can borrow for a mortgage and still qualify for a conforming loan. Knowing these can work to your advantage. For 2023, the conforming loan limits are $726,200 for most states and $1,089,300 for high-cost areas. Check out the table below for more detailed information:
| Units | Contiguous States, District of Columbia and Puerto Rico | Alaska, Guam, Hawaii and the U.S. Virgin Islands |
|---|---|---|
|
1 |
$726,200 |
$1,089,300 |
|
2 |
$929,850 |
$1,394,775 |
|
3 |
$1,123,900 |
$1,685,850 |
|
4 |
$1,396,800 |
$2,095,200 |
Lets consider a practical example. Say youre looking to buy a home in a state with the standard conforming loan limit of $726,200. If the home youre interested in is priced at $750,000, you could either look for a less expensive home or go for a non-conforming loan. But remember, a non-conforming loan might come with a higher interest rate.
In the context of conventional loans and their limits, “1-unit dwelling” typically refers to a single-family home. It’s a standard home built on a single lot without any shared walls, floors or ceilings with other residential units.
In mortgages and loan limits, its important to specify the type of dwelling — be it 1-unit, 2-unit (duplex), 3-unit (triplex) or 4-unit (fourplex) — because loan limits can vary based on the type of property. Generally, loan limits are higher for multi-unit properties compared with 1-unit dwellings.
Understanding the type of dwelling youre interested in can guide you in determining which loan limits apply to your situation. It will also influence the mortgage rates, down payment requirements and other terms of your loan.
Conforming Loan Limits for 2023: How Much Can You Borrow in 2023?
What is the conforming loan limit for 2023?
As a result, the baseline conforming loan limit for 2023 will be $726,200, up $79,000 from this year’s limit of $647,200. Higher-cost areas will have a new loan limit of $1,089,300, or up to 150% of the baseline loan limit. This year, the loan limit for high cost areas is $970,800.
What are conforming loan limits?
Conforming loan limits are the maximum amount of money that a lender can lend to a borrower while still conforming to the guidelines set by Fannie Mae and Freddie Mac .The Federal Housing Finance Agency
What is a conforming loan limit value (CLL) in 2023?
The Federal Housing Finance Agency (FHFA) today announced the conforming loan limit values (CLLs) for mortgages to be acquired by Fannie Mae and Freddie Mac (the Enterprises) in 2023. In most of the United States, the 2023 CLL value for one-unit properties will be $726,200, an increase of $79,000 from $647,200 in 2022. National Baseline
Will FHA and FHA raise conforming loan limits for 2023?
To help potential homebuyers caught between this crunch of high home prices and mortgage rates, two federal entities—the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA)—will raise conforming loan limits and FHA loan limits for 2023.