2021 Loan Limits are Available Now!
2021 is here, and so are the 2021 loan limits.
If you are considering a new house in the coming year, you should learn about upcoming loan limits so you can purchase the best possible home.
Of course, financial responsibility is essential, and the loan limits may be higher than what you need or can afford, but understanding the new limits can help you make the right choice for your future purchase.
What are the 2021 Loan Limits?
The FHFA announced back in late November that loan limits for conforming loans would increase yet again in 2021. The baseline limit for the year will be $548,250, an increase from $510,400.
This number reflects the maximum loan amount that can be supported by Fannie Mae and Freddie Mac. Many government agencies and offices also use this number as their maximum limit.
Past laws, including the Housing and Economic Recovery Act, require that the baseline limit be adjusted every year to reflect changes in the U.S. economy and housing prices. Housing prices in 2020, according to data from the FHFA, increased 7.42%. Therefore, the baseline limit for loans in 2021 will also increase by this percentage.
There are, however, high-cost areas where the 2021 loan limits will be higher. In most regions, the baseline limit represents that highest-possible government supported loan. However, there are areas, such as San Diego, Los Angeles, and San Francisco, where the cost of housing is much higher than an “average” (for lack of a better term) American city. In areas where the cost is higher, the loan limits will also be higher.
In our area of San Diego County, the loan limit for a single-family home is $753,250. However, if you are purchasing a multiunit property, you can secure government-supported financing that is even higher. The loan limit for a four-unit property in San Diego County is over $1.4 million.
In Imperial County and Riverside County, the limit is the baseline for the nation ($548,250 for a single-family) while neighboring Orange County has a loan limit of $822,375. This is just one example of the differing loan limits in nearby areas.
Are They Available Today?
The loan limits for 2021 will allow for the purchase of many high-quality homes and properties, creating new opportunities for borrowers and homebuyers. These loan limits are available now, and you can take advantage of the higher borrowing potential by contacting your local mortgage agent right away.
For conventional loans, you can close right now. With FHA loans, however, the rules are slightly different. FHA loans are based off the case assignment date, but the new limits will only apply to case numbers assigned after the end of 2020. So if the case number is for January 1st or after, you can use the 2021 loan limits.
The current loan limits for calculating VA loan entitlement, assuming it is required, is available now and can be applied to any loan that closes on or after January 1st. So if you are just starting the loan-application process, you can take advantage of the 2021 loan limits.
For USDA loans, the 2021 loan limits do not really apply, as there is rarely a maximum mortgage size. Instead, these loans have limits on income and value of the home, which will limit borrowing potential. However, you can still expect access to many excellent properties with USDA loans.
Loan Limits Not a Guarantee of That Amount
It should be noted that the loan limits for 2021 are not a guarantee that you will qualify for this amount. Essentially, this is the maximum amount that lenders can lend and still receive government support on the loan. Unfortunately, you may not qualify for this full amount, although others may qualify for more if they use other forms of financing.
What Happens if You Receive Ineligible Funding that Exceeds the Loan Amount?
Although this situation is rare, it is possible to receive funding that exceeds the amount set by the FHFA. For example, if it is a loan supported by Fannie Mae that was submitted thought Desktop Underwriter before December 12, 2020 that have the right recommendation, they are due only to exceeding 2020 loan limits that are acceptable so long as it complies with the 2021 loan limits. The new loan limit will be applied to case-files submitted after the December 12th date. The same applies (with a few minor differences) to Freddie Mac loans.
For FHA, the case assignment must be on or after January 1st.
With VA loans, the details are different. The VA has not announced the maximum amount for those transactions.
What is the FHFA?
The FHFA stands for Federal Housing Financing Agency, and it should not be mistaken for the Federal Housing Administration, or “FHA.” While the both work within the housing sector, they are two different organizations.
The FHFA is responsible for the overall supervision and regulation of Fannie Mae and Freddie Mac. Part of this role includes setting standards for lending, including loan limits. They work to ensure certain entities fulfill their designated roles and operate in a safe, secure, and stable manner.
An important part of the FHFA’s duties is to set lending standards, especially loan limits. Using a wide variety of data and resources, this agency monitors the housing market and determines exactly how much can be lent on loans supported by Fannie Mae and Freddie Mac.
Find Outstanding Loans for Your Future Purchase!
We are proud to serve San Diego and the surrounding area, as well as all of California and many other states. Contact us today and find out how we can help you take advantage of the 2021 loan limits.
From single-family houses to multiunit properties, we are ready to help you get the best loan possible!