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2024 Mortgage Loan Limits: Conventional, Conforming, FHA

As a potential homebuyer exploring financing options for purchasing or refinancing in 2024, understanding key loan limits helps you identify the programs offering the best terms for your goals. 

Loan ceilings for popular options including conventional, conforming, and Federal Housing Administration (FHA) insured mortgages adjust annually based on housing market indicators. These loan limits play a crucial role in determining the affordability and accessibility of housing for today’s buyers.

Staying informed about the latest changes and reviewing the current factors influencing these boundaries can provide valuable insight, especially for budding real estate investors

Let’s take a deeper look at the updates for each loan type and explore some of what borrowers can expect in the coming year

Choosing the Conventional Path

Conventional loans are mortgage loans that are not insured or guaranteed by a government agency. They often cater to borrowers with a stable financial background and typically have higher credit score requirements

While median home prices slowed from the record growth of 2021 and 2022, they still increased by 5.56% in 2023, according to recent numbers from the Federal Housing Finance Agency (FHFA).

The 2024 mortgage loan limits for conventional loans have seen a considerable increase to keep up with these rising home values, rising to $766,550 for 1-unit homes in the majority of the United States.

In high-cost areas, such as large metropolitan cities like Los Angeles, DC, and New York, the maximum conventional loan has jumped to $1.14 million. This adjustment reflects the need to offer borrowers more flexibility in expensive housing markets. Hopeful buyers in Alaska, Hawaii, Guam, and the US Virgin Islands will also be subject to this limit.

So what does this mean for borrowers? You can now qualify for a conventional loan on a more expensive house without having to pay jumbo rates or meet stricter requirements. This is great news in competitive markets where rising prices push many homes above the old cutoffs, and the larger loan limits offer more purchasing power and flexibility.

Conforming Vs. Non-Conforming Loans

Some potential buyers may be confused by the terms “conventional,” “conforming,” and “nonconforming” mortgages. Let’s make it easier to understand — all conforming loans are conventional, and most conventional loans are conforming

Simply put, a conforming loan meets the eligibility criteria from Fannie Mae and Freddie Mac, two organizations created by Congress to provide liquidity, stability, and affordability to the American mortgage market.

Conforming mortgages are likely to be cheaper for the borrower due to the relatively stringent requirements, such as a minimum credit score of 620 and a maximum debt-to-income ratio of 43% – 50%. They can offer lower interest rates than other products because they come with less risk to the lender.

Non-conforming loans commonly include jumbo loans and those backed by the federal government, such as FHA, VA, or USDA loans. As of October of 2023, the 30-year jumbo rate was averaging around 7.72%.

It’s not just mansions that are being financed by nonconforming loans. Residents of certain parts of California like Silicon Valley, Santa Clara, and Sunnyvale are looking at median home prices in the millions of dollars — far above the old conventional loan cap of $1,089,300.

Making Homebuying More Accessible

The Federal Housing Administration (part of the US Department of Housing and Urban Development, or HUD) is an agency that insures mortgages made by private lenders that are insured by the government, enabling lenders to offer home loans to a much broader range of buyers. 

For 2024, the FHA mortgage limit “floor” and “ceiling” are $498,257 and $1,149,825, depending on your location. If you’re a senior who’s considering HUD’s Home Equity Conversion Mortgage (HECM), the nationwide maximum claim amount will be $1,149,825 for all areas.

A somewhat rare financing option that could be amazing for certain buyers, USDA (US Department of Agriculture) home loans are ideal for low-income borrowers in eligible rural areas. USDA mortgages have no down payment requirement and effective January 1, 2024, the current interest rate for Single Family Housing Direct home loans is 5.125%, and the loan limits mirror those set by the FHFA.

For qualifying veterans, service members, and survivors with full entitlement, there is no limit on how much you can borrow, but your lender will determine the size of the loan you can afford based on your credit score, current income, and assets like savings or retirement accounts. If you’re eligible for a Veterans Administration loan, you can also finance a multifamily dwelling with up to 4 units.

Long-Term Goals

In a housing market plagued by low inventory and fierce competition, higher loan limits provide expanded buying power for motivated shoppers and are more in line with what real-world homes cost. This is especially crucial for first-time buyers trying to get their foot in the door while grappling with rising prices and sparse selections.

The new thresholds also give house hunters more leverage to make competitive offers over listing prices or cover appraisal gaps. Essentially, middle-class Millennials will get more mortgage money to play with thanks to these increases. 

If you’re ready to achieve your dream of owning a home in 2024, it’s crucial to partner with an experienced mortgage lender with in-depth industry knowledge who can help you find the best product for your individual needs. Now is the perfect time to make a move toward becoming a homeowner — contact me today!

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