September 25, 2023


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Banks are offering bigger loans than ever to keep up with the housing crisis

Banks are offering bigger loans than ever to keep up with the housing crisis

As housing prices soared in 2021, lenders have had to adapt to keep pace. And that has resulted in the largest one-year increase in conforming loan limits in history.

That jargon-y term, which generally represents the maximum amount consumers can borrow under a typical 30-year mortgage, jumped $100,000 in the past year to $647,200 in most of the nation’s counties.

That works out to an 18% increase in loan limits, which blows past the previous high of 15.9%, which was set in 2005.

Technically, conforming loan limits are the maximum amounts mortgage lenders can give to buyers and still sell those loans to Fannie Mae and Freddie Mac. Generally, borrowers who need more must take out a “jumbo loan,” which carries additional expenses.

In some of the nation’s most expensive real estate regions, the increase was even more than 18%. Some 159 counties currently have a higher loan limit than the national average.

The adjustment in the limit could have a big impact on buyers, though. A Zillow study of home sale prices in December 2021 vs. January 2022 shows that 2.9 million borrowers would have been able to avoid a jumbo loan under the new limits. (The Federal Housing Finance Agency resets those limits once a year in January.)

Don’t expect jumbo loans to go anywhere, though. Zillow notes the number of homes that could potentially require one, even with the new limits, rose by 217,000 from January to February. And housing prices are expected to continue climbing sharply in the coming months.

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