Mortgage Loan Limits Largely Rise In 2023

Loan limits for most mortgages are increasing in 2023. Rocket Mortgage^® is accepting loans with 2023 conventional loan limits now. You can now get a conventional loan for up to $726,200 in most areas of the country and $1,089,300 in Alaska and Hawaii.

While updated FHA and VA loan limits won't be in effect until after the new year, if you're getting a conventional loan from Fannie Mae and Freddie Mac, you can take advantage of increased buying power now. We’ll go over what the new limits are and what this means for home buyers or those looking to refinance.

There are three types of loans impacted by changes to mortgage limits that are either in effect now or will be at the beginning of 2023. Let’s run through them.

Conventional Loan Limits

Baseline conventional loan limits (also known as conforming loan limits) for 2023 increased roughly 12.21%, rising $79,000 to $726,200 for 1-unit properties. Limits were also generally higher in high-cost areas, defined as those in which 115% of the local median home value is higher than the baseline conforming loan limit.

In high-cost areas, limits are set on a county-by-county basis. The ceiling is the limit for Alaska and Hawaii – $1,089,300 for a 1-unit property.

A home with up to 4 units is considered a single-family property and is available under standard mortgage financing programs. The limits are higher depending on the number of units you’re buying. See the table below.

These limits apply immediately to loans backed by the government-sponsored enterprises Fannie Mae and Freddie Mac. Rocket Mortgage^® clients don’t need to wait for 2023.

VA Loan Limits

Under normal circumstances, VA loans don’t have loan limits. In the event that you default on the loan, the VA insures the same percentage of the mortgage for lenders regardless of the loan amount.

However, there are a couple of instances where VA loan limits do come into play. Where that’s the case, the limits listed above apply.

You might have a loan limit if you have what’s called impacted entitlement. In this case, part of your veteran benefit from the VA is shown as used up. You may have this if you have a VA loan that hasn’t been fully paid back or if you had a foreclosure that you haven’t paid the VA back for, for example.

If lenders think that a loan is large enough that it presents a slightly higher risk, they may also have different qualification requirements. While there’s no specific loan amount at which these VA jumbo loans start, many lenders including Rocket Mortgage use anything above conforming loan limits in the area as a guide. At Rocket Mortgage, you can get a VA jumbo loan for up to $2 million if you qualify.

FHA Loan Limits

FHA loan limits are updated at the beginning of each calendar year and effective January 1. Below we've listed the minimum and maximum loan amounts on a national level for residential properties with up to 4 units.

Before looking at these, it’s important to note how the limits on FHA mortgages work. The absolute lowest your own loan limit can be is 65% of the national conforming loan limit, which for a 1-unit property in 2023 is $472,030. However, loan limits are set entirely at the county level, so in many areas it’s going to be higher. Alaska and Hawaii fall at the national ceiling, which for 1-unit properties is $1,089,300.

If you’re looking to find the limits in your area, the Department of Housing and Urban Development has a mortgage limits search engine. Although ostensibly for FHA mortgage limits, once the FHFA officially announces conforming loan limits, you can select “Fannie/Freddie” under limit type. To see the limits for next year, be sure to also select “CY2023” for the limit year.

The conforming loan limit in your area is important because amounts above conforming loan limits represent jumbo loans. While a Jumbo Smart loan from Rocket Mortgage has several benefits as compared to the jumbo loan options offered by other lenders, including a lower down payment requirement and no required mortgage insurance, you’ll still have to meet stricter qualification standards than you would on a conforming loan.

Additionally, you may be able to get a lower rate on a conforming loan than you could on a jumbo loan because investors may be looking to be compensated for the increased risk of a bigger loan amount. It should be noted that this isn’t always the case and it depends heavily on investor appetite in the market at any given moment.

Loan limits that have generally gone up across the country mean that people should be able to afford more home without having to deal with the additional qualification requirements necessary to get a jumbo loan. With loan limits up more than 10% for a conventional loan, this represents a major increase in your purchasing power.

If you’re interested in checking out your loan options, you can apply online or give us a call at (833) 326-6018.