The Federal Housing Finance Agency (FHFA) has announced an increase in the size of home loans that the government can guarantee against default, in response to the rising housing prices. Starting next year, mortgage buyers Fannie Mae and Freddie Mac will be able to acquire loans of up to $806,500 on single-family homes in most parts of the country. This new conforming loan limit represents a 5.2% increase from the 2024 level.
FHFA, which oversees Fannie Mae and Freddie Mac, sets limits on the size of loans that these entities can purchase. Loans within these limits are known as conforming loans, while those exceeding the limit are categorized as jumbo loans. The adjustment of conforming loan limits is done annually by FHFA to reflect changes in U.S. home values, which have been steadily increasing, albeit at a slower pace due to a housing slump that has impacted U.S. home sales.
The FHFA House Price Index revealed a 4.3% increase in U.S. home prices during the July-September quarter compared to the same period last year. Anju Vajja, the deputy director for FHFA’s Division of Research and Statistics, noted that U.S. house price growth has been decelerating since the previous year's fourth quarter.
While higher mortgage rates have contributed to a slowdown in home sales, a scarcity of available properties in many markets has led to an upward trend in prices. The 2025 single-family home conforming loan limit will be applicable to most regions, with exceptions for states like Alaska and Hawaii, as well as counties where the local median home value exceeds double the conforming loan limit.
For instance, in Los Angeles and New York counties, the conforming loan limit for single-family homes will be $1,209,750 starting next year.
