Moves this week by two federal agencies are expected to help lift U.S. homeownership in 2025.
The Federal Housing Finance Agency and the Department of Housing and Urban Development's Federal Housing Administration have increased loan limits for single-family mortgages insured by the entities next year.
The FHFA announced a 5.2% increase to the maximum conforming loan for most mortgages bought by Fannie Mae and Freddie Mac. The limit will rise by $39,950 to $806,500. In higher-cost markets such as New York City, the new maximum conforming loan will be $1,209,750, up from $1,149,825.
Fannie and Freddie buy and guarantee home loans from lenders. The FHFA oversees the two companies and doesn't permit them to buy loans over the conforming limits. The over-the-limit mortgages are typically called jumbo loans.
"The increase in loan limits for 2025 means that more mortgages will be bought by Fannie and Freddie, which will make it easier for home buyers to qualify for and close their loans," the National Association of Home Builders said in a statement.
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The 2008 Housing and Economic Recovery Act stipulates that conforming loan limits be adjusted each year to reflect the change in the average U.S. home price, according to the FHFA. The agency determined that the average U.S. home price increased by 5.2% between the third quarters of 2023 and 2024.
Meanwhile, the FHA "floor" for single-family loans will rise to $524,255 from $498,257. FHA’s "ceiling" amount for single-family mortgages will increase from to $1,209,750 from $1,149,825. FHA said it updates its annual loan limits each year using a formula from the National Housing Act.
“Regular adjustment of loan limits ensures that FHA financing continues to be available in all markets to all those who rely on our programs to access homeownership,” Federal Housing Commissioner Julia Gordon said in a statement.