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- The Federal Housing Finance Agency has increased the 2021 borrowing limit for conforming mortgages to $548,250 in most parts of the US.
- If you live in an area with a higher cost of living, you may be able to borrow up to $822,375 in 2021.
- You can borrow more if you’re buying a two-to-four unit home.
- If you need to borrow more than a conforming mortgage allows, you can apply for a jumbo mortgage.
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The new FHFA borrowing limit for 2021
Each year, the Federal Housing Finance Agency announces how much you can borrow with a conforming mortgage. In 2021, the borrowing limit for a single-unit home in most parts of the US will be $548,250.
In more expensive parts of the country — such as Alaska, Hawaii, Guam, and the US Virgin Islands — the limit increases to $822,375.
These limits have gone up since 2020. The single-unit borrowing limit in 2020 was $510,400 in most parts of the country and $765,600 in high-cost areas.
Keep in mind, these are the limits for single-unit homes. You can borrow more for two-unit, three-unit, and four-unit homes.
If you’re wondering what the limit is in your city, you can see the county-by-county guide on the FHFA website.
What to do if you don’t qualify for a conforming mortgage in 2021
What if you need to borrow more than the FHFA allows for a conforming mortgage in 2021? Then you can apply for a nonconforming mortgage, also known as a jumbo mortgage.
A jumbo mortgage is simply a loan for people who need more than the FHFA normally allows. It typically has stricter eligibility requirements and a higher interest rate than a conforming mortgage. Jumbo mortgages are riskier for lenders, so companies make it harder to qualify to decrease the likelihood of a borrower defaulting on payments.
Each lender has its own requirements for jumbo mortgages, but you’ll likely need a higher credit score, lower debt-to-income ratio, and bigger down payment than you would for a conforming mortgage. You’ll probably need at least a 700 credit score and 20% or more for a down payment. You also may need a debt-to-income (DTI) ratio between 36% and 45%.
The amount you can borrow with a jumbo mortgage depends on how strong your financial profile is. The better your credit score, DTI ratio, and down payment, the more you may be approved to borrow.
Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. Before joining the Business Insider team, she was a freelance writer for publications like SoFi and The Penny Hoarder.
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