Housing News

If You’re Planning to Buy a Home or Refinance in 2025, Here Are the New Loan Limits

Given that home prices have continued to rise over the last year, it’s not surprising that the federal government would raise the loan limits on the most popular mortgages.

The Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development separately announced in late November the maximum amount that buyers can borrow for mortgages backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration (FHA) will be increasing for 2025.

The conforming loan limits for Conventional loans are set to increase in much of the country from $766,550 in 2024 to $806,500 in 2025. These loans may be backed by Fannie Mae or Freddie Mac.

Meanwhile, loan limits for FHA loans will increase from $498,257 for 2024 to $524,225 for 2025.

The new loan limits go into effect on Jan. 1, 2025.

Conventional loan limits will be increasing in all but six counties, according to the FHFA.

These loan limits are based on nationwide home prices. Under federal law, loan limits for Conventional loans (the loans backed by Fannie or Freddie) are based on the FHFA Home Price Index, a measure of home prices in the U.S. That index showed that home prices rose by 5.2% in the last year.

As a result, Conventional and FHA loan limits increased for the 9th year in a row.

Why loan limits matter

Loan limits are exactly what they sound like. They are the maximum dollar amount that each of these agencies will support per home loan.

This will impact homebuyers who will be eligible to get larger Conventional or FHA loans that are reflective of the state of the housing market.

That’s important because both Conventional and FHA loans offer lower down payments and other favorable loan terms compared to jumbo loans, which are loans above the Conventional loan limit amount.

For homebuyers who want to buy a larger home, or perhaps one that’s located in a pricier market, they may now be able to use a Conventional or FHA loan instead.

Homeowners who currently have a jumbo loan may also be able to refinance into a Conventional loan. This has the potential to save them money in the long run.

Homebuyers in more expensive markets may be eligible for higher loan limits

The loan limits are also increasing in what the FHFA and FHA call "high-cost" areas. Those are counties where 115% of the local median home value is above the baseline loan limit amount.

These areas, which include markets like New York City, Washington, D.C., and California’s Silicon Valley, boast home prices that are well beyond the average housing market. As a result, the maximum loan limit for these areas is higher than it is in the rest of the country.

For Conventional and FHA loans in the high-cost areas, the 2025 loan limit is $1,209,750.