Conforming Loan Limits In 2023

When you get a mortgage, there’s a limit to how much you can borrow. On an individual level, this will be determined by how creditworthy you are and how much you can afford to spend each month.

At the industry level, lenders are limited by how much they can lend to borrowers if they want their loans to conform to the standards set forth by the Federal Housing Finance Agency (FHFA). Conventional loans that meet these standards are called conforming loans.

The FHFA has announced its conforming loan limits for 2023. Spoiler alert: Your buying power is increasing.

The FHFA sets conforming loan limits for Fannie Mae and Freddie Mac, the two government-sponsored enterprises that it regulates.

Fannie Mae and Freddie Mac purchase mortgages that meet their standards from lenders and then repackage them into mortgage-backed securities for investors. This process gives lenders the liquidity needed to continue providing borrowers with affordable mortgage loans.

Both Fannie Mae and Freddie Mac have additional criteria for the loans they purchase, including minimum credit scores, minimum down payments and maximum debt-to-income ratios (DTI). But in general, when people talk about conforming loan standards, they’re talking about loan limits.

So, what exactly are these limits?

The baseline conforming loan limit for 2023 is $726,200 – up from $647,200 in 2022. The limit is higher in Alaska and Hawaii, where the number is $1,089,300 for a 1-unit property.

If you need a home loan that exceeds the conforming loan limit for your county, you’ll have to get a jumbo loan, which allows higher loan limits. However, these loans are typically harder to qualify for, requiring higher credit scores and larger down payments.

Conforming loan limits are tied to home prices. Each year, the FHFA updates its baseline loan limit based on its House Price Index (HPI) report, which tracks the average increase in home values over the previous year.

The new loan limits are calculated each year based on third-quarter data from the FHFA HPI. In 2022, the loan limit increase was 18.05%. In 2023, Rocket Mortgage is expecting an increase of about 12.21%.

Conforming loans are great for consumers because they typically come with lower interest rates than other non-conforming loan types.

If you’re trying to purchase a home whose sale price exceeds the conforming loan limit for your area, increasing your down payment so that you stay within the limit can be one way to be able to enjoy the benefits of a conforming loan without having to take out a jumbo loan.

Home prices vary quite a bit from state to state, and even from county to county. This makes having a single conforming loan limit for the entire country difficult – after all, it’s hard to compare home prices in rural Ohio to home prices in Manhattan, one of the most expensive real estate markets in the country.

This is why the FHFA has a higher limit for areas it deems to be “high-cost,” a designation based on an area’s median home values compared to the baseline conforming loan limit.

The exact conforming loan limit varies depending on the median home value in a given area, up to 150% of the baseline conforming loan limit. To see what the current limit is in your county, use the FHFA’s interactive map.

An Example Of High-Cost Area Limits

To see what this might look like in practice, let’s say you’re considering buying a $800,000 house in California.

If you were to buy that house in San Bernardino County, which isn’t currently listed as an FHFA high-cost area, you’d likely need to take out a jumbo loan, since you’d be exceeding the $726,200 baseline loan limit.

However, Los Angeles County is traditionally one of the most expensive areas in which to buy a house in the U.S. When the FHFA makes high balance loan limits official, it's likely going to be near the top end of the scale ($1,089,300 for a single-unit home). You would be able to buy the house without a jumbo loan.

In addition to being the ceiling in high-cost areas, the highest conforming loan figure for a given number of units is also the loan limit in Alaska and Hawaii.

If you’re considering purchasing a home outside of the conforming loan limits, be sure you understand whether you can afford a non-conforming loan and what this type of loan would mean for your finances. The larger the loan is, the higher your monthly payment will be.

This is especially important to consider in high-cost areas. Even with higher loan limits, much of the local inventory could still exceed the high-cost loan ceiling.

In San Francisco, for example, the maximum conforming loan limit is $1,089,300, but the median list price is nearly $1.2 million as of this writing (September 2022). High prices like this can make it difficult to purchase a home without having to get a jumbo loan.

What would a jumbo loan mean for your finances? The upfront cost alone can be prohibitive for many borrowers. While conforming loans allow down payments as low as 3%, most jumbo loan borrowers are required to put down a minimum of 20%. They’ll also need to have a credit score in the 700s and a DTI of 45% or lower to qualify.

If you’re able to meet these requirements, a jumbo loan may be beneficial for you. But before you enter the home buying process, be sure you know what the loan limits are for your area and that you understand what a conforming versus a non-conforming loan would mean for your financial situation.

If you plan on purchasing your home with a mortgage and have a sizable home buying budget, it’s important to understand what the maximum loan limits are in your county. While other loan types, such as jumbo loans, can remove the barrier of having to stay within a certain price limit, that means forgoing the benefits of getting a conforming loan.

If you’re wondering what your own personal loan limit should be, check out our advice on how to determine how much house you can afford.