What You Need To Know About Rising Conforming Loan Limits In 2023
Thinking about purchasing a home in 2023? If you’re ready to take the first steps in making homeownership a reality, you may be interested in the upcoming limits to conforming loans. Conforming loans are the most popular type of mortgage loan, because they often come with lower interest rates than other types of loans. The Federal Housing Finance Agency (FHFA) determines the conforming loan limits each year based upon the market, and the limit is once again increasing in the upcoming year. Here’s what you need to know about the changes:
What Are Conforming Loans?
Conforming loan mortgages are able to be purchased by government-sponsored enterprises Fannie Mae and Freddie Mac. Conforming loan limits are determined each November in accordance with the change in average home prices (determined by county). Between the third quarters of 2021 and 2022, home prices increased by an average of 12.21%. In response to this price change, the new conforming loan limits for 2023 will increase by the same percentage. For most areas, this means that the new limit will be $726,200. This number is up from $647,200 in 2022.
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A Closer Look At What This Means For Coloradans
Because not all markets are the same, residents in certain areas may be able to qualify for what’s known as a high-balance conforming loan. A high-balance conforming loan is designed for counties with a higher-than-average cost of living, such as many counties in Colorado.
For example, in Boulder County, the conforming loan limit is $856,750. Since you’ll need to provide a down payment of at least 5% for high-balance conforming loans, this means that you may be able to purchase a home that costs $901,849.
In the counties of Denver, Arapahoe, Adams, Broomfield, Jefferson, and Douglas, the conforming loan limit is $787,750. For a buyer putting 5% down, this means that the purchase price can be up to $829,000.
Despite the market going through a bit of a correction, home prices have still increased from 2021 to 2022. As a result, buyers will have a little more spending power in 2023. If you’d like to learn more about financing a home, I can help. When you’re ready to find the best loan options for your needs, please contact me at michaela@michaelaphillips.com or by phone at 303-579-5517.