The federal agency that oversees Fannie Mae and Freddie Mac announced that the conforming limits for mortgages will increase by more than 7% in 2021.

These limits restrict lenders on the maximum mortgage loan amounts they can offer through the FHA loan program. Due to home price increases, the Housing and Economic Recovery Act makes sure these limits can keep up so homebuyers, especially first-timers, can have the financial flexibility to achieve their dreams of homeownership.

Between the third quarters of 2019 and 2020, home prices increased by on average by more than 7%. In response, the Federal Housing Finance Agency says next year’s maximum limit for one-unit properties will be at nearly $550,000. The baseline maximum of these loans must also increase by the same percentage as the home price increases.

In high-cost areas, the new ceiling can be 150% of the maximum conforming limit. In some areas, that puts the limit at $822,375.

The Federal Housing Finance Agency was established in 2008 and oversees and regulates Fannie Mae and Freddie Mac, among others, to ensure they fulfill their mission and serve borrowers in a responsible manner.