The mortgage giant will allow loans of up to $1.2 million in high-cost markets, adding momentum to criticism that government support for home loans will further worsen mortgage affordability.
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Rising home prices have led mortgage giants Fannie Mae and Freddie Mac to raise their conforming loan limits to $806,500 in most parts of the country next year, encouraging more homebuyers to take advantage of jumbo mortgages. will be able to avoid it.
The $39,950 increase in Fannie and Freddie’s basic single-family loan limit is the smallest since 2021, but pushes the high-cost market limit to $1,209,750, the Federal Housing Finance Agency (FHFA) announced Tuesday. did.
This would give ammunition to critics such as the Housing Policy Council, which argues that federal mortgage assistance is exacerbating housing affordability problems.
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“Although loan limits remained unchanged for a long time during and after the Great Financial Crisis, the rapid rise in house prices since then has accelerated loan limit increases faster than household income growth,” HPC said in a statement. said. “As a result, more and more top-tier borrowers will be able to access federal assistance for mortgage financing, putting upward pressure on home prices.”
The increase in the maximum amount will be welcomed by many home buyers. The stricter underwriting standards and higher interest rates that often apply to “jumbo mortgages” that are too big for Fannie and Freddie to buy will no longer apply.
The new limits won’t go into effect until Jan. 1, but lenders can start implementing them now if they’re willing to wait until the new year to sell loans to Fannie and Freddie that exceed the current limits.
Some of the country’s largest mortgage lenders have been offering up to 802,650 mortgages since September, as if to accommodate, knowing that home prices will continue to rise and limits will be raised. Jumbo loans are priced in dollars.
Congress has tied the conforming loan limit to the average U.S. home price, as measured by FHFA’s Home Price Index. U.S. home prices rose 4.3% in the year to Sept. 30, according to the index’s latest readings, also released on Tuesday.
However, the conforming loan limit is indexed based on the expanded data FHFA HPI, which measures the annual home price increase at 5.21 percent.
Conforming loan limits, 2000-2025
Source: Federal Housing Finance Agency
On a percentage basis, the 5.21% increase from the 2024 conforming loan limit of $766,550 is the smallest increase since 2017, when the limit was increased by 1.7% for the first time in a decade.
When mortgage rates hit historic lows during the pandemic, the 2022 conforming loan limit was increased by a record $98,950, an 18% increase from the previous year, due to rising home prices.
Conforming loan limits for multi-unit properties.
Source: Federal Housing Finance Agency
The 2025 qualifying limits for multiple-unit homes are $1,032,650 for a two-unit home, $1,248,150 for a three-unit home, and $1,551,250 for a four-unit home.
The high-cost market caps are $1,548,975 for a two-unit home, $1,872,225 for a three-unit home, and $2,326,875 for a four-unit home.
In high-cost markets, Fannie and Freddie are permitted to purchase larger mortgages based on multiples of the median home price, up to a cap equal to 150 percent of the baseline conforming loan limit.
Next year, conforming loan limits for single-unit real estate will exceed $1 million in 114 counties and nine metropolitan census regions, as well as throughout Alaska and Hawaii. For 40 counties and census tracts across the country, the qualifying limit is also higher than the $806,500 threshold, but less than $1 million.
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