Conforming Loan Limit Increase for 2023: How it Affects US Transferring Employees
What You Need to Know About the Conforming Loan Limit Increase for 2023
In November of 2022, the Federal Housing Finance Agency (FHFA) announced the conforming loan limit values (CLLs) for Fannie Mae and Freddie Mac will increase from $647,200 to $726,200 in 2023 This is an increase of $79,000 and will affect one-unit properties in most of the United States.
What is the Conforming Loan Limit?
The conforming loan limit is the maximum loan amount for one-unit properties that can be guaranteed and purchased by Fannie Mae and Freddie Mac. A loan amount higher than the conforming loan limit is considered a jumbo loan.
How is the Conforming Loan Limit Determined?
The US Housing and Economic Recovery Act of 2008 (HERA) requires that the conforming loan limit be adjusted each year to reflect the change in the national average US home price. According to FHFA, home prices increased 12.21% on average between the third quarters of 2021 and 2022, so the conforming loan limit will increase by the same percentage.
What Does this Mean for Your US Transferring Employees?
This is good news for organisations with US transferees or assignees who are hoping to purchase a home in the United States. An increase in the conforming loan limit means employees can borrow an additional $79,000 without requiring a jumbo loan, which is typically more difficult to qualify for and requires more documentation than a conforming loan.
How Does This Affect High-Cost Areas?
A high-cost area is a location in which 115% of the local median home value exceeds the conforming loan limit. In these high-cost areas, the conforming loan limit can go up to a ceiling of $1,089,300 (150% of $726,200).
In any given year, there are roughly 150-200 counties in the USA that are considered high-cost areas, and many employers need to entice employees to relocate to these locations. Some examples include areas in the vicinity of New York City, the San Francisco Bay Area, and Washington D.C. and surrounding counties. The increase of the conforming loan limit may put these areas within reach for some transferring employees through easier-to-obtain financing.
Whatever the financing needs of your transferees may be, SIRVA Mortgage is here to help. With over 30 years of focus and expertise in relocation mortgage lending, we understand the important role home financing plays in the relocation process. Please visit our mortgage website to learn more or contact us at MortgageClientServices@sirva.com.
Contributor: Linda Laramy, Director Client Services, SIRVA Mortgage