Conventional loan limits shoot past $1 million
Home prices rose at a record pace in 2021 and 2022, putting pressure on buyers to get bigger and bigger mortgage loans.
Luckily, loan limits are keeping pace with home price inflation.
Starting January 1, 2023, new conforming loan limits will rise to $726,200 in most of the U.S. — up from $647,200 in 2022. The limit for high-cost areas is also rising, from $970,800 to over $1 million ($1,089,300).
And you don’t have to wait until 2023 to take advantage. Many lenders are already offering higher loan limits today.
In this article (Skip to...)
- 2023 Loan limits
- Loan limits map
- How loan limits work
- About conforming loans
- About jumbo loans
- FHA loan limits 2023
- Today’s mortgage rates
Conventional loan limits for 2023
Lending limits for conventional conforming loans got a sizable boost this year.
The Federal Housing Finance Agency (FHFA) determined that home prices are up by more than 12% on average across the nation. It raised conforming loan limits by the same percentage — a dollar increase of almost $80,000 for the standard one-unit home. Multi-unit properties got a similar increase.
|Standard Limit||High-Cost Area|
Baseline conforming loan limits
Standard loan limits for 2023, which apply to most of the United States, are as follows:
- 1-unit homes: $726,200
- 2-unit homes: $929,850
- 3-unit homes: $1,123,900
- 4-unit homes: $1,396,800
Keep in mind that these are only the ‘baseline’ limits. In areas with high-cost real estate, buyers get significantly higher conventional mortgage limits.
Maximum conforming loan limits
High-balance conforming loan limits vary by county. Depending on location and local real estate prices, conforming loan limits can go as high as:
- 1-unit homes: $1,089,300
- 2-unit homes: $1,394,775
- 3-unit homes: $1,685,850
- 4-unit homes: $2,095,200
Areas such as Alameda County, California; Arlington, Virginia; and Jackson, Wyoming enjoy the maximum conforming loan limits, while cities like Seattle, Washington and Baltimore, Maryland fall between the “floor” and the “ceiling.”
In Alaska, Hawaii, Guam, and the U.S. Virgin Islands — which follow their own loan limit rules — the baseline loan limit for 2023 is $1,089,300 for a one-unit property.
Conforming loan limits by county for 2023
The following map shows conforming loan limits by county. You can access an interactive version of the loan limits map on FHFA’s website.
How do mortgage loan limits work?
Loan limits determine the maximum amount you can borrow under certain mortgage programs. These caps can vary a lot depending on the type of mortgage loan you use and where you live.
Conventional mortgages adhere to one set of loan limits and FHA to another. VA loans essentially did away with limits in 2020.
In the world of conforming loans, Fannie Mae and Freddie Mac limit “borrowable” amounts to keep their nationwide programs available to those who need them.
For instance, Fannie Mae doesn’t want a $10 million loan going through its system. That’s a lot of risk wrapped up in one transaction, and the agency would rather issue many smaller loans to many home buyers.
Fortunately, loan limits are increasing in 2023 to reflect rising home prices across the country.
What is a conforming loan?
A conventional conforming loan is any mortgage that:
- Is not backed by the federal government (meaning it’s not an FHA, VA, or USDA loan)
- Has a loan amount within local conforming loan limits
- Meets lending guidelines set by Fannie Mae and Freddie Mac
Mortgages within conforming loan limits are eligible to be backed by Fannie Mae and Freddie Mac, as long as the borrower meets basic criteria for credit score, income, down payment, and debt levels.
Conforming loan requirements
In addition to staying within local loan limits, borrowers have to meet financial requirements to get a conforming loan.
Conforming loans typically require:
- A credit score of at least 620
- A debt-to-income ratio below 43%
- A down payment of at least 3%
- Two-year history of stable employment and income
Exact conforming loan requirements can vary by lender, but they all have to meet the minimum guidelines set by Fannie and Freddie.
These standards give lenders and investors more confidence in the loans they create. As a result, conforming loans are available with competitive mortgage rates and just 3% down payment.
What if my loan is over the conventional limit?
Remember that the conforming loan limit applies to the loan amount, not the home price.
For instance, say a buyer is purchasing a 1-unit home in Boulder, Colorado where the limit is $856,750. The home price is $1 million and the buyer is putting $400,000 down. They would be eligible for a conforming loan. The final loan amount is $600,000 — well within local loan limits for the area.
Still, many applicants will need financing above their local loan limit. This may require a different type of home loan.
The easiest way to get a mortgage above conventional loan limits is to use a jumbo loan. A “jumbo mortgage” is any home loan that exceeds local conforming limits.
Let’s say a home buyer in Boulder, CO puts down $100,000 on a $1 million home. In this case, their loan amount would be $900,000. That’s above the local conforming loan limit of $856,750. This buyer may need to finance their home purchase with a jumbo loan.
You might think jumbo mortgages would have higher interest rates, but that’s not always the case. Jumbo loan rates are often near or even below conventional mortgage rates.
The catch? It’s harder to qualify for jumbo financing. You’ll likely need a credit score above 700 and a down payment of at least 10-20%.
If you put down less than 20% on a jumbo home purchase, you’ll also have to pay for private mortgage insurance (PMI). This would increase your monthly payments and overall loan cost.
Piggyback financing for high-priced homes
Perhaps the most cost-effective method is to choose a piggyback loan. The piggyback or “80/10/10” loan is a type of financing in which a first and second mortgage are opened at the same time.
Typically, this structure is used to avoid private mortgage insurance.
A buyer can get an 80 percent first mortgage, 10 percent second mortgage (typically a home equity line of credit), and put 10 percent down. Here’s how it would work.
- Home price: $900,000
- Down payment: $90,000 (10%)
- Financing needed: $810,000
- Local conforming limit: $726,200
The buyer could structure their loan as follows.
- Down payment: $90,000
- 1st mortgage: $726,200
- 2nd mortgage: $83,000
The home is purchased with a bigger conforming loan and a smaller second mortgage. The first mortgage may come with better terms than a jumbo loan, and the second mortgage offers a great rate, too.
What’s the jumbo loan limit for 2023?
Technically there’s no jumbo loan limit for 2023.
Since jumbo mortgages are above the conforming loan limit, they’re considered “non-conforming” and are not eligible for lenders to sell to Fannie Mae or Freddie Mac upon closing.
That means the lenders offering jumbo loans are free to set their own criteria — including loan limits. For example, one lender might set its jumbo loan limit at $2 million, while another might set no limit at all and be willing to finance homes worth tens of millions.
But the amount you can borrow via a jumbo or non-conforming loan is limited by your finances.
You need enough income to make the monthly mortgage payments on your new home. And your debt-to-income ratio (including your future mortgage payment) can’t exceed the lender’s maximum.
You can use a mortgage calculator to estimate the maximum home price you can likely afford. Or contact a mortgage lender to get a more accurate number.
What are FHA loan limits for 2023?
FHA loans come with their own borrowing limits. These are set at 65% of the conforming loan limit. Like the Federal Housing Finance Agency, FHA allows for higher limits on 2-, 3-, and 4-unit properties, as well as extended limits in high-cost counties.
Standard (baseline) FHA loan limits for 2023 are as follows:
- 1-unit homes: $472,030
- 2-unit homes: $604,400
- 3-unit homes: $730,525
- 4-unit homes: $907,900
You might notice that FHA’s limits are considerably lower than the conforming limits. That’s by design.
The FHA program, backed by the Federal Housing Administration, is meant for home buyers with moderate incomes and credit scores.
But the FHA also suits home buyers in expensive counties. Single-family FHA loan limits reach $1,089,300 in expensive areas within the continental U.S. and even higher for homes in Alaska, Hawaii, Guam, or the Virgin Islands.
What are today’s conventional mortgage rates?
Conventional loan rates can be a great deal for home buyers.
Conventional pricing is closely tied to your credit score and down payment — so if you have a strong financial profile, you could get a below-market interest rate.
Get a rate quote for your standard or high-limit conforming loan. Compare this to FHA rates, jumbo rates, and piggyback mortgage rates to make sure you’re getting the best value.