2023 conforming loan limits to be announced on November 29.

The mortgage market is in for another big shift in a few months. That's when a sizable increase -- roughly 12% or 13% -- in the conforming loan limit appears likely to be announced. If so, it will bring the ceiling to well over $1 million in places where houses are super expensive. The loan limit is a key benchmark for both borrowers and lenders. It is the maximum dollar amount on mortgages that can be acquired by government-sponsored enterprises Fannie Mae and Freddie Mac. Anything under the limit that is sold by primary lenders to the GSEs must comply to their rules (thus the term "conforming"), while anything above the ceiling is considered a jumbo loan. It's important for borrowers to understand that distinction because loans touched by Fannie and Freddie are sometimes priced cheaper than other loans – and may require lower down-payments (editor’s note). The conforming loan limit is adjusted annually by the government. The limit for this year is $647,200 in most places -- a whopping 18.5% higher than the 2021 limit of $548,250 -- and it's $970,000 in a handful of high-cost markets.

Any changes will be announced on Nov. 29, when third quarter prices are revealed, and will go into effect at the beginning of the new year. House price increases have slowed lately because of higher mortgage rates and inflation fears, which have combined to send many wannabe buyers and sellers to the sidelines. But at least until the middle of the year, houses were still selling fast and furious and for top dollar. Recently, the Federal Housing Finance Agency’s (FHFA) quarterly index was up 17.7% year-over-year at the end of the second quarter. Another double-digit jump in the loan limit appears to be in the offing. Based on second-quarter numbers, the ceiling would rise 12%, to nearly $725,000. In high-cost markets, it would fly past the million-dollar benchmark to roughly $1,087,500. If there was just a 3% year-over-year increase in the index in the third quarter, the baseline limit would still increase by 15%, to $745,000. If the bump in the index was 6%, the ceiling would rise by 18%, to $764,000. All this is pure speculation, of course. There's still a long way to go until the third-quarter figures on which the limit is based are announced. For what it's worth, there's about a 30-day window between the new limits being announced and going into effect. During that time, many lenders jump the gun by raising their ceilings, but they hold on to their loans until they can sell them to the GSEs early next year. Some will even offer conforming loans at the higher ceiling prior to the November announcement based on their own assessments. 

Source: The Housing Scene by Lew Sichelman published by Uexpress