2012-2013 Conforming & FHA Loan Limit Update

Conforming loan limits change each year. In “the old days,” Fannie and Freddie would bring out the new limits on the weekend after Thanksgiving, and the maximum loan amount was set based on the October-to-October changes in median home price. (And by the way: before the FHFA the Fannie/Freddie regulator was OFHEO, which would set the criteria on what constitutes a conforming loan, including debt-to-income ratio limits and documentation requirements.)

But things became fuzzy when a temporary increase in the Conforming Loan Limits for high-cost areas of living was incorporated into the 2008 economic stimulus package, creating a conforming loan tier above the tier 1 limit of $417,000.

Congress authorized an increase of the single family residences limits to the lesser of $729,750 or 125% of the median home value within the metropolitan statistical area (MSA). Last year this $729,750 level was ratcheted back to $625,500, and although there was plenty of griping along the coasts, the housing market did not collapse.

And loan agents and Realtors on those coasts need to remember that there is not a lot of political push from the country’s midsection for high conforming loan limits.

So at this point, the $417,000 limit applies across most of the country. But in areas with high home values (about 250 counties), the government increased those limits.

So look for any 2013 changes to be announced in November.

And below is a summary of 2012 loan limits and rate differences between tiers.

2012 CONFORMING LOAN LIMITS

Tier 1-TRUE CONFORMING: Lowest rates for loans to these limits:
-$417,000 (1 unit)
-$533,850 (2 units)
-$645,300 (3 units)
-$801,950 (4 units)

Tier 2-HIGH-BALANCE CONFORMING: Rates .125 to .25% higher than Tier 1 for loans to these limits:
-$625,500 (1 unit)
-$800,775 (2 units)
-$967,950 (3 units)
-$1,202,925 (4 units)
-High-Balance limits vary by county: find yours here

Tier 3-JUMBO: Rates .25% to .5% higher than Tier 1 for loans to $2m.

2012 FHA LOAN LIMITS

Tier 1-TRUE FHA: Lowest rates for loans to these limits:
-$417,000 (1 unit)
-$533,850 (2 units)
-$645,300 (3 units)
-$801,950 (4 units)

Tier 2-HIGH-BALANCE FHA: Rates often same as Tier 1 for loans to these limits:
-$729,750 (1 unit)
-$934,200 (2 units)
-$1,129,250 (3 units)
-$1,403,400 (4 units)
-High-Balance limits vary by county: find yours here
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Related:
– FHA Mortgage Insurance Overview

by Rob Chrisman & Julian Hebron