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Single-Family Conforming Loan Limit to Rise to $417,000
The Office of Federal Housing Enterprise Oversight (OFHEO) announced on Nov. 29 that the maximum 2006 conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac will increase to $417,000 for one-unit properties, from the current limit of $359,650. The increase will be effective Jan. 1, 2006.
Following the charters of Fannie Mae and Freddie Mac, the conforming loan limit is adjusted annually based on the October-to-October percentage increase in the Federal Housing Finance Board’s (FHFB) home price index, the statutory basis for annual adjustments in the loan limit. The FHFB index increased 15.96% between October 2004 and October 2005 to an average home price of $306,759.
Loan limits for larger properties will also increase. Effective Jan. 1, limits on these properties will increase to:
- $533,850 for mortgages on two-family properties (up from $460,400)
- $645,300 for mortgages on three-family properties (up from $556,500)
- $801,950 for mortgages on four-family properties (up from $691,600).
Limits for FHA-insured single-family loans will also increase in some areas as a result of the increase in the Freddie Mac conforming loan limit. Local limits are based on 95% of area median home prices. However, the limit cannot exceed the ceiling for high-cost areas, which is 87% of the Freddie Mac limit, or be less than the lowest FHA loan limit, or floor, which is 48% of the Freddie Mac limit.
Based on the 2006 Freddie Mac limit, NAHB expects the FHA ceiling and floor in 2006 to become approximately $362,790, and $200,160, respectively. HUD will officially announce the new FHA levels near the end of this year.
The conforming loan limit may be increased by up to 50% for Alaska, Guam, Hawaii and the Virgin Islands, which would mean that the Fannie/Freddie limit for these areas would become $625,500 for a one-unit property, up from $539,750. The FHA ceiling for these areas could be as high as $544,185, depending on median area home prices.
In addition, the guarantee amount for loans guaranteed by the Department of Veterans Affairs (VA) is 25% of the conforming loan limit. Therefore, the maximum, no-downpayment, VA-guaranteed loan will be $417,000 for 2006.
For more information, e-mail William Renner at NAHB, or call him at 800-368-5242 x8597.
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