Loan limits for most mortgages are increasing in 2023. 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.
Understanding The Loan Limit Changes 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.
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.
| Conventional Loan Limits | |
| Number of Units | Loan Limit Amount |
| 1 | $726,200 |
| 2 | $929,850 |
| 3 | $1,123,900 |
| 4 | $1,396,800 |
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 use anything above conforming loan limits in the area as a guide.
FHA Loan Limits
FHA loan limits are updated at the beginning of each calendar year. 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 2022 is $420,680. However, loan limits are set entirely at the county level, so in many areas it’s going to be higher.
| 2022 FHA Loan Limits | |
| Number of Units | Loan Limit Floor |
| 1 | $420,680 |
| 2 | $535,650 |
| 3 | $651,050 |
| 4 | $809,150 |
Why Loan Limits Matter
The conforming loan limit in your area is important because amounts above conforming loan limits represent jumbo loans. 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.The Bottom Line
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.Loan limits for most mortgages are increasing in 2023. 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.
Understanding The Loan Limit Changes 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.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.
| Conventional Loan Limits | |
| Number of Units | Loan Limit Amount |
| 1 | $726,200 |
| 2 | $929,850 |
| 3 | $1,123,900 |
| 4 | $1,396,800 |
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 use anything above conforming loan limits in the area as a guide.
FHA Loan Limits
FHA loan limits are updated at the beginning of each calendar year. 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 2022 is $420,680. However, loan limits are set entirely at the county level, so in many areas it’s going to be higher.
| 2022 FHA Loan Limits | |
| Number of Units | Loan Limit Floor |
| 1 | $420,680 |
| 2 | $535,650 |
| 3 | $651,050 |
| 4 | $809,150 |
Why Loan Limits Matter
The conforming loan limit in your area is important because amounts above conforming loan limits represent jumbo loans. 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.The Bottom Line
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.