The Federal Housing Finance Agency (FHFA) is set to raise the maximum size of home loans eligible for government backing to match increasing housing market prices.
Beginning in the next year, Fannie Mae and Freddie Mac, two significant mortgage purchasers, will have the ability to buy loans up to $806,500 for single-family homes in most areas across the nation, as announced by the agency on Tuesday.
This adjustment marks a 5.2% increase compared to the loan limits established for 2024.

The FHFA supervises Fannie Mae and Freddie Mac, which acquire home loans from banks and other lending institutions, providing a guarantee against default for these loans.
Subsequently, these loans are packaged into securities that are sold to investors.
FHFA has regulations in place that determine the maximum loan sizes that Fannie and Freddie can accept.
These loans are categorized as conforming loans, while any loans exceeding this threshold are referred to as jumbo loans.

Each year, FHFA reassesses and modifies the conforming loan limits, taking into account fluctuations in home values throughout the United States.
While home prices have been increasing this year, the pace has slowed, coinciding with a housing downturn that positions U.S. home sales for their lowest figures since 1995.
The agency’s House Price Index indicated a 4.3% annual increase in U.S. home prices during the July to September period compared to the same timeframe last year.

Anju Vajja, the deputy director of FHFA’s Division of Research and Statistics, noted, “The growth in U.S. house prices decelerated in the third quarter, reflecting a trend initiated in the last quarter of the preceding year.”
Although high mortgage rates have constrained the number of homes sold, a scarcity of available properties in various markets continues to drive prices upward.

The new conforming loan limit for single-family homes in 2025 will affect most parts of the country, but the FHFA will permit higher limits in specific states like Alaska and Hawaii, as well as in counties where the local median home value exceeds twice the standard conforming loan limit.
For instance, starting next year, counties like Los Angeles and New York will have a conforming loan limit set at $1,209,750, illustrating the varying limits based on localized housing markets.