We can always count on this time of the year to bring us Black Friday sales and endless holiday music. It is also the time for new loan limits — but how are these values set? Is it arbitrary?

The short answer is no — it’s all data-driven.

To calculate loan limits, the Federal Housing Finance Agency (FHFA) compares the FHFA Housing Price Index from the 3rd quarter to the previous year’s numbers, and then uses this data to determine if the loan limit should increase or remain static. FHA then takes this number and calculates the maximum loan amount from there.

Here are a few ways you can use these new limits to your advantage:

• Conventional limits for a single-family home/condo are now $766,550; $981,500, $1,186,350 and $1,174,400 for 2-4 units respectively. That means that a borrower can purchase a single-family home for $790,000 with just 3% down or a 4-unit property for $1,200,000 with just 5% down!

• FHA loan limits also rose to $498,257, $637,950, $771,125 and $958,350 for 1 to 4 unit properties. That means that a borrower can now finance a $516,000 single-family/condo or a $1,000,000 4-unit using an FHA mortgage.

Conventional limits are effective today and FHA will start accepting the higher amounts starting Jan 1, 2024.

With rates rising and balance sheets shrinking over the past 24 months, obtaining financing for jumbo mortgages has become more difficult and expensive. Banks instead are keeping that money to offer to their own private banking or wealth management clients.

These loan limit increases now make it easier and less expensive, while preapprovals can be more rock-solid with conventional or FHA financing. Buyers can also take advantage of SecureShop, which provides a fully-underwritten preapproval.

Want to hear more about what other tools or products may be available in 2024 to help you with your buyers or sellers? Reach out to a Key Mortgage loan officer today.