Every November, the Federal Housing Finance Agency (FHFA) announces new conforming loan limits for the upcoming year. For homebuyers and real estate agents, understanding these limits is crucial for navigating the homebuying process and making informed financial decisions. Whether you’re purchasing your first home or helping clients find the perfect property, conforming loan limits offer a roadmap for affordable financing.
When you get a mortgage on a home, there’s a limit to how much you can borrow. On an individual level, this limit is influenced by your creditworthiness and how much you can afford to spend each month (credit score, and Debt-to-income (DTI) ratios). However, at the industry level, lenders are also limited by how much they can lend if they want their loans to conform to the standards set forth by the Federal Housing Finance Agency (FHFA).
Conventional loans that meet these standards are called conforming loans, and their maximum amounts—known as conforming loan limits—are set annually by the FHFA. These limits represent the maximum loan amounts that Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) at the heart of the U.S. housing finance system, are willing to securitize. By adhering to these limits, lenders operate within safe and standardized boundaries.
Staying within conforming loan limits provides significant advantages. For homebuyers, it means access to loans backed by Fannie Mae and Freddie Mac, which typically come with more competitive interest rates compared to non-conforming or jumbo loans. For real estate agents, understanding these limits is crucial for offering clients accurate guidance and helping them navigate financing options effectively.
Related Topic: Jumbo Loans
The FHFA plays a pivotal role in setting conforming loan limits. Established under the Housing and Economic Recovery Act (HERA) of 2008, the FHFA reviews these limits annually to reflect changes in the U.S. housing market. Adjustments typically take effect in January, but the limits are announced every November, giving lenders and borrowers time to prepare.
The baseline conforming loan limit is determined based on the average U.S. home price. For high-cost areas, the FHFA allows higher limits to accommodate local housing market variations.
The FHFA House Price Index (HPI) Report plays a crucial role in determining whether conforming loan limits should be adjusted, as it tracks changes in home prices nationwide. While these limits can rise to reflect increasing home values, they cannot decrease, even if prices drop. This adjustment process ensures more borrowers can access affordable financing options, keeping homeownership within reach for many.
Related Topic: Prevent Annoying Credit Offers before starting the mortgage process – Opt out at www.optoutprescreen.com
Increased conforming loan limits expand credit availability, allowing more homebuyers to qualify for loans within the GSEs’ parameters. For first-time homebuyers, this can mean the difference between qualifying for their dream home or needing to settle for less.
Conforming loans backed by Fannie Mae and Freddie Mac often come with lower interest rates compared to jumbo loans. Over the life of a 30-year mortgage, even a slight reduction in the interest rate can save tens of thousands of dollars.
Real estate professionals rely on conforming loan limits to streamline the homebuying process. Agents can confidently advise clients on which homes fall within their financial reach based on current loan limits.
Examining past loan limits provides valuable insights into trends in home prices and housing affordability.
Year |
Baseline conforming loan limits |
High-cost area loan limits |
| 2021 | $548,250 | $822,375 |
| 2022 | $647,200 | $970,800 |
| 2023 | $726,200 | $1,089,300 |
| 2024 | $766,550 | $1,149,825 |
| 2025 | $806,500 | $1,209,750 |
High-cost areas, including Alaska, Hawaii, Guam, and the U.S. Virgin Islands, have unique limits due to their elevated property values. If you’re considering buying in one of these regions, understanding these thresholds is essential.
Approximately 100-200 counties across the U.S. are classified as high-cost areas. These regions experience elevated home prices due to demand, geography, or local market trends. The higher conforming loan limits for these areas make homeownership more accessible.
For instance, in Hawaii or California’s Bay Area, where median home prices often exceed $1 million, the increased loan limits provide flexibility for borrowers without requiring them to pursue riskier jumbo loans.
Good news for homebuyers: the new 2025 conforming loan limits are already available. The baseline limit of $806,500 and the high-cost area limit of $1,209,750 can be used immediately, even before the new year.
This proactive approach by lenders ensures borrowers can take advantage of the higher limits to secure financing sooner rather than later.
Reach out to learn how conforming loan limits affect homebuying or refinancing for you!
For homebuyers and real estate agents alike, understanding conforming loan limits is more than just knowing a number. These limits:
Whether you’re purchasing in a high-cost area or staying within the baseline limits, these thresholds offer a foundation for smart financial decisions.
The concept of Conforming Loan Limits began in 1970 with the Emergency Home Finance Act, which set the first limit at $33,000 for loans purchased by Fannie Mae and Freddie Mac. This act also introduced higher limits for high-cost areas such as Alaska, Hawaii, and Guam, and was later expanded to include the U.S. Virgin Islands.
Congress periodically raised these limits, tying them to housing price changes starting in 1980. The Housing and Community Development Act that year also introduced higher limits for multi-unit properties. By 1992, the term “conforming loan limit” was formally established.
In 2008, the Housing and Economic Recovery Act (HERA) granted the Federal Housing Finance Agency (FHFA) authority to adjust the limits annually based on changes in the national housing price index. These adjustments ensure the CLL reflects market conditions, with separate limits set for one- to four-unit properties.
No, VA loan limits are no longer tied to FHFA Conforming Loan Limits. Until January 1, 2020, VA loan limits matched the FHFA limits. However, the Blue Water Navy Vietnam Veterans Act of 2019 removed this restriction. As of January 1, 2020, veterans can obtain VA-backed home loans with no down payment, regardless of loan amount, in all areas. For more details, visit the VA’s Blue Water Navy Act page.
Learn More About VA Loans.
No, FHA loans are not directly limited by FHFA Conforming Loan Limits but are influenced by them. FHA loan limits are determined based on median house prices in accordance with the National Housing Act. These limits fall between the low-cost area limit, set at 65% of the national conforming loan limit, and the high-cost area limit, set at 150% of the national conforming loan limit. For more details, refer to the applicable FHA Mortgagee Letter.
The USDA’s Rural Housing Services (RHS) has its own loan limits and requirements that vary depending on the program. For instance, the Single Family Housing Guaranteed Loan Program is for properties located in rural areas and has eligibility criteria based on factors like household size, income (below 115% of the area median), owner occupancy, and borrower immigration status. On the other hand, the Single Family Housing Direct Home Loan Program sets loan limits at no more than 80% of the local HUD 203(b) loan limit values.
Learn more about USDA Loans
Ready to see what you can afford? Contact us today to discuss your home-buying goals and take your first step toward homeownership!
Equal Housing Lender. Make sure you understand the
features associated with the loan program you choose, and that it meets your
unique financial needs. Subject to Debt-to-Income and Underwriting
requirements. This is not a credit decision or a commitment to lend.
Eligibility is subject to completion of an application and verification of home
ownership, occupancy, title, income, employment, credit, home value,
collateral, and underwriting requirements. Not all programs are available in
all areas. The pre-approval may be issued before or after a home is found. A
pre-approval is an initial verification that the buyer has the income and
assets to afford a home up to a certain amount. This means we have pulled
credit, collected documents, verified assets, submitted the file to processing
and underwriting, ordered verification of rent and employment, completed an
analysis of credit, debt ratio and assets, and issued the pre-approval. The
pre-approval is contingent upon no changes to financials and property approval/appraisal.
*Veterans Affairs loans require a funding fee, which is based on various loan
characteristics. Sales price cannot exceed appraised value. Refinancing an
existing loan may result in the total finance charges being higher over the
life of the loan. Offers may vary and are subject to change at any time without
notice. Interest rates are subject to change daily and without notice. LTV’s
can be as high as 96.5% for FHA loans. FHA minimum FICO score required. Fixed
rate loans only. W2 transcript option not permitted. For USDA loans, 100%
financing, no down payment is required. The loan amount may not exceed 100% of
the appraised value, plus the guarantee fee may be included. Loan is limited to
the appraised value without the pool, if applicable. *Veterans Affairs loans
require a funding fee, which is based on various loan characteristics. Sales
price cannot exceed appraised value.
If you are looking for a home loan, considering a conventional loan is a great place to start. As America recovers from its’ economic turmoil, equity is slowly returning to the average homeowner. You might want to again consider a conventional loan as your vehicle of choice to the American Dream.
Definition
A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate. The maximum limit for a conforming loan depends on the county and state you live in and can be found here: Fannie Mae Loan Limits.
Conventional loans can be either Fixed or an adjustable rate. Fixed-rate mortgages have a set interest rate for the entire length of the mortgage term which can be between 10 and 30 years. An adjustable-rate mortgage (ARM) has a term of 30 years with a low introductory rate for a fixed period followed by periodic adjustments according to a specific benchmark, typically a specific LIBOR or a T-Bill index.
Requirements
If you in income and credit qualify and want to purchase a new home or merely lower the rate or term of you existing home, a Conventional loan may be what is best for you. Conforming loans require a down payment/equity as little as 3%* for a fixed rate term or 10%* for an Adjustable rate.
If you need to take cash out for any purpose Conventional financing will allow you to borrower up to 85%* of your home’s value. You can apply for pre-approval of a loan which helps you determine what you can afford to borrow (pre-approval is not guaranteed) or you can apply for a loan after you find a property you are interested in buying. Always check with your Loan Officer for specific guidelines.
Getting the Loan
If you would like to see if you will qualify for this loan, contact one of our Licensed Mortgage Loan Originators by clicking here.