The maximum conforming loan limit for mortgages to be acquired by Fannie Mae and Freddie Mac will increase by almost 7.5 percent in 2021.

The Federal Housing Finance Agency said in a statement Tuesday that the loan limit for one-unit properties will increase from $510,400 in 2020 to $548,250 in 2021, a 7.42 percent increase.

Because of median home values, several counties in Eastern Massachusetts will have higher limits.

The FHFA adjusts the conforming loan limit annually to reflect the change in the average U.S. home price, as required by the Housing and Economic Recovery Act (HERA). Conforming loan limits had remained stagnant for a decade, but since 2016, the limit has increased each year.

The baseline maximum conforming loan limit in 2021 will increase by the same percentage as the FHFA’s estimated housing price increase. Using its third quarter 2020 House Price Index report, the FHFA calculated the increase based on estimates of the average U.S. home value over the last four quarters. According to FHFA’s seasonally adjusted data, house prices increased 7.42 percent between the third quarters of 2019 and 2020.

Conforming loans in half of Massachusetts’ counties will be subject to the new $548,250 limit. The other half will have higher maximum limits because 115 percent of the local median home value exceeds the baseline limit. Many high-cost areas in the U.S. saw median home values rise in 2020, driving up the maximum loan limits in these areas, according to the FHFA.

Both Dukes and Nantucket counties will qualify for the maximum limit of $822,375 on one-unit properties, up from $765,600 in 2020. HERA limits the maximum conforming loan ceiling to 150 percent of the baseline.

Essex, Middlesex, Norfolk, Plymouth and Suffolk counties will have a conforming loan limit in 2021 of $724,500. The 2020 limit in these counties is $690,000.

Source: FHFA

A wider pool of people will now qualify for conforming mortgages, possibly benefiting first-time homebuyers. Conforming mortgages financed by government-sponsored entities and the FHFA are the most lenient, allowing eligible first-time homebuyers to put down as little as 3 to 5 percent in some cases. Jumbo loans, on the other hand, require borrowers to have higher FICO scores and larger down payments, and also come with asset and reserve requirements.

The median sale price in Massachusetts year-to-date through October is $442,500, 10.6 percent higher than last year, according to The Warren Group, publisher of Banker & Tradesman. There have been 49,240 single-family home sales – a 0.7 percent decrease from the first ten months of 2019.

Conforming Loan Limit in Greater Boston Raised to $724,500

by Diane McLaughlin time to read: 2 min