The Federal Housing Finance Agency (FHFA) recently announced that it will raise loan limits for mortgages backed by Fannie Mae and Freddie Mac, giving some homebuyers greater purchasing power. Starting in 2021, the maximum conforming loan limit for single-unit properties will increase to $548,250 – a 7.4% increase from the current limit of $510,400.

The announcement is positive news for homebuyers, who will have the opportunity to borrow more money under conforming loan guidelines in addition to taking advantage of record low mortgage rates. Any loan amount above the conforming limit is considered a jumbo loan, which generally has more stringent requirements and tends to carry higher interest rates.

The exact conforming loan limit varies geographically, and while it will increase to $548,250 throughout most of the country including Illinois, Michigan, Indiana, and Wisconsin, it will be higher in more expensive markets such as areas in California and New York. Raised limits reflect rising home prices throughout the U.S. including Chicagoland, where prices are appreciating after remaining relatively flat over the last few years.