FHFA, FHA Announce Conforming Loan Limits for 2025
Written By: Joel Palmer, Op-Ed Writer
Mortgage underwriters and processors can offer larger FHA mortgage loans and loans that conform to FHFA limits next year.
Both agencies announced higher loan limits last week.
The Federal Housing Finance Agency (FHFA) announced that conforming loan limit values (CLLs) for mortgages acquired by Fannie Mae and Freddie Mac will be $806,500 for one-unit properties in most of the United States in 2025.
That represents a 5.2 percent increase from the 2024 limit. The percentage increase in CLLs mirrors the average increase in U.S. home prices, as measure by FHFA’s Home Price Index, which increased 5.21 percent between the third quarters of 2023 and 2024.
The baseline limits for two-unit properties will be $1,032,650. It will be $1,248,150 for three-unit properties and 1,551,250 on four-units properties.
The Housing and Economic Recovery Act (HERA) requires FHFA to adjust the enterprises’ baseline CLL value each year to reflect the change in the average U.S. home price.
For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit value, the applicable loan limit will be higher than the baseline loan limit. HERA establishes the high-cost area limit in those areas as a multiple of the area median home value, while setting the ceiling at 150 percent of the baseline limit.
Median home values generally increased in high-cost areas in 2024, which increased their CLL values. The new ceiling loan limit for one-unit properties will be $1,209,750. That amount is also the baseline loan limit for one-unit properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
CLL values will be higher in all but six U.S. counties or county equivalents.
Loan limits on Federal Housing Administration loans will also increase in most of the country, as announced by the U.S. Department of Housing and Urban Development (HUD).
FHA's nationwide forward mortgage limit floor and ceiling for a one-unit property in 2025 are $524,225 and $1,209,750. The limit for Alaska, Hawaii, Guam and the Virgin Islands is just over $1.8 million.
FHA must update its annual loan limits each year using a formula prescribed in the National Housing Act (NHA). This formula uses county or Metropolitan Statistical Area (MSA) home sale data to derive new loan limits for the three cost categories established by the law.
The NHA requires FHA to establish its floor and ceiling loan limits based on the national conforming loan limit set by the Federal Housing Finance Agency (FHFA) for conventional mortgages owned or guaranteed by Fannie Mae and Freddie Mac.
The floor applies to those areas where 115 percent of the median home price is less than the floor limit. Any area where the loan limit exceeds this floor is considered a high-cost area. In these areas, FHA establishes varying loan limits above the floor based on the respective median home prices in each area. The NHA requires FHA to set its maximum loan limit ceiling for a one-unit property for high-cost areas at 150 percent of the national conforming loan limit. Forward mortgage limits for the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands are adjusted further by FHA to account for higher costs of construction.
FHA also announced that the HECM (aka reverse mortgage) maximum claim amount will increase from $1,149,825 in 2024 to $1,209,750 for 2025. This maximum claim amount applies to all areas, including the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
To find a complete list of FHA loan limits, areas at the FHA ceiling, and areas between the floor and the ceiling, visit FHA's Loan Limits Page.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
