Dan Green

Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. .

San Francisco Home - High-Cost Area

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What is a High-Cost Area?

A high-cost area is a city, county, or parish where the median home value significantly exceeds the national average, leading to higher loan limits for mortgages.

A Longer Definition: High-Cost Area

In the context of mortgages, high-cost areas are geographic regions where home values are significantly higher than the national average. The concept was legally established under the Housing and Economic Recovery Act (HERA) of 2008, and gives home buyers in those areas access to higher mortgage loan limits. Conventional mortgages and FHA mortgages use different loan limits.

For example, the current conforming mortgage loan limit is $766,550 for a one-unit home. In high-cost areas, the conforming loan limit ranges up to $1,149,825.

The formula for identifying which areas are high-cost is straightforward. If a region’s median home value exceeds 115% of the baseline mortgage loan limit, that area is designated as a high-cost area, and its local loan limits are adjusted upwards proportionally.

Without this adjustment, many first-time home buyers would have to use jumbo mortgages to buy their homes, often with stringent underwriting criteria and higher mortgage rates. Designating an area as high-cost makes homeownership more affordable and accessible to all.

High-Cost Area: A Real World Example

First-Time Home Buyer Stories: High-Cost Areas

Imagine a scenario where a first-time home buyer is eager to purchase a home in a well-known, high-cost area like San Francisco. They come across a home that, while relatively modestly priced for the Bay Area, still has a sale price significantly higher than what one would typically find in other parts of the country.

In most cities, the cost of the home would necessitate a jumbo loan, which often asks for large down payments and stricter credit qualifications. However, because the buyer is purchasing in a high-cost area, their starting loan size will fall within the special, increased mortgage loan limits specially designated for high-cost areas like this one.

Furthermore, because the mortgage remains within conforming mortgage loan limits, the buyer opts to use Fannie Mae’s HomeReady mortgage, which allows for a 3 percent downpayment with reduced mortgage insurance costs, making the prospect of owning a home in an expensive market like San Francisco a realistic and achievable goal.

High-Cost Areas For 2024 Mortgage Loan Limits

The Federal Housing Finance Agency evaluates median home prices in every U.S. county each year, assigning the high-cost designation to qualified counties and metropolitan statistical areas.

The following counties were added to the high-cost area list for 2024:

The following counties were removed from the high-cost area list for 2024:

Here is a complete list of counties assigned a high-cost conforming mortgage loan limit for 2024:

Alaska

California

Colorado

District Of Columbia

Florida

Hawaii

Idaho

Massachusetts

Maryland

New Hampshire

New Jersey

New York

Pennsylvania

Tennessee

Utah

Virginia

Washington

West Virginia

Wyoming

Common Questions About High-Cost Areas

What determines if an area is considered high-cost?

An area is considered high-cost if its median home values exceed 115% of the baseline conforming loan limit set by the FHFA. This designation is based on local housing market data and varies across regions.

How do high-cost mortgage loan limits differ from standard mortgage loan limits?

High-cost area loan limits are higher than those in standard areas. While the exact limits vary, they can reach 150% of the national conforming loan limit to accommodate higher property values in these regions.

Does living in a high-cost area affect mortgage interest rates?

The mortgage interest rates in high-cost areas are comparable to those in standard areas for conforming loans. However, avoiding a jumbo loan, which may have higher rates, can be a financial benefit.

Are there special mortgage programs available in high-cost areas?

Yes, programs like Fannie Mae’s HomeReady mortgage and Freddie Mac’s Home Possible mortgages cater to first-time home buyers in high-cost areas, offering low down payment options and favorable loan term, making homeownership more accessible.

How do I see my local mortgage loan limit?

To find your local mortgage loan limit, use this interactive mortgage loan limit tool.


Changelog

  • November 28, 2023: Added a list of high-cost areas for 2024 based on new information from the Federal Housing Finance Agency
  • November 28, 2023: Added extra Common Questions to link to the Mortgage Loan Limits page

       A high-cost area is a city, county, or parish where the median home value significantly exceeds the national average, leading to higher loan limits for mortgages.

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