Freddie Mac and Fannie Mae set the maximum loan amount for loans
Freddie Mac and Fannie Mae set the maximum loan amount for loans that would qualify for their best rates each fall. The loan limits based on the median price of homes across America. The loan limits increased over the years as house prices. The conforming loan limit had increased to $417,000 by 2006. Home prices increased steadily from 1986 to 2006. In an attempt to help out our struggling economy, the president signed the 2008 economic stimulus package.
This package increased the FHA loan limit to $729,750 and it also increased the conforming loan limit from $417,000 to $729,750. At least all loans under that would carry the best rates but that is not what happened and we all thought the conforming loan limit had increased to $729,750. The best rates were jumbo loans and carried interest rates nearly 1 percent higher than conforming loans. Since 2008, refinancing homebuyers and homeowners have benefited from these higher loan limits by offering lower rates for loan amounts up to $729,750.
FHA, Fannie Mae and Freddie Mac have all announced that after Sept. 30, the max loan limits will drop to $625,500 for all loans closed. Some areas will experience even lower conforming loan limits since the max loan limit is tied to the median income in each area.