2004 Conforming Loan Limits Set

Starting Jan. 1, the conventional loan limit for single-family properties will increase by 3.4%, according to the government-sponsored enterprises (GSEs). The current conforming loan limit of $322,700 will be raised to $333,700.

The mortgage giants determine conventional loan limits annually, basing the amounts on the changes that occur from October to October on average home purchase prices. The 2003, or current, loan limit was based on a 7.3% increase on average home prices.

Mortgages that exceed the maximum loan amount fall into the jumbo loan category, which carry higher interest rates. With the new loan limits, Fannie Mae estimated about 95,000 more homebuyers can be eligible for a conforming loan, which can result in savings of $21,900 over the life of a 30-year mortgage.

According to Freddie Mac, the new single-family mortgage loan limit will allow 150,000 additional families to obtain lower cost mortgage financing and can save borrowers as much as $38,700 over the life span of a 30-year loan.

The 3.4% increase applies to multifamily unit loans as well, said the GSEs.

Conforming loan limits for two-family properties will rise to $427,150; three-family property mortgages will increase to $516,300; and four-family unit loans will go up to $641,650.

The loan limit on second mortgages will increase from the current $161,350 to $166,850, reported Fannie.

The D.C.-area companies also pointed out that the maximum loan amounts for one-to-four family units in Alaska, Hawaii, Guam and the U.S. Virgin Islands are 50% higher than those set for the rest of the country ($500,550). Additionally, the second-mortgage loan limit in these areas will be $250,275.

By law, Federal Housing Administration loan limits are tied to conforming loan limits, which means the 3.4% increase might apply to federally insured mortgages as well. If the administration follows this track, the maximum amount it finances for a home in a high cost area could change from $280,749 to $290,294. In low cost areas, the current loan maximum of $154,896 could increase to $160,162. The FHA usually reports new loan limits in January.