2025 Mortgage Loan Limits Have Increased: What You Need to Know

What Are Conforming Loan Limits?

Conforming loan limits set the maximum loan sizes eligible for purchase by Fannie Mae and Freddie Mac, the two government-sponsored entities that back mortgages in the U.S. Each year, the FHFA adjusts these limits based on the average home price appreciation across the country.

For 2025, the FHFA increased the limit because home prices rose by 5.21% in 2024. Regions with higher costs of living qualify for even higher loan limits due to the local real estate market. These limits also vary by property type—single-family homes, condos, townhomes, and multi-unit properties each have their own values.

Why Do These Limits Matter?

Here's why you should care: conforming loans are usually easier to qualify for compared to jumbo loans. They require lower down payments, less cash in reserves, and have simpler underwriting requirements.

If you've been leaning toward buying a home but felt shut out due to high prices, these updated limits could open up opportunities. For first-time buyers, the opportunity to buy a home with just 3% down becomes a game-changer. Move-up buyers or those considering investment properties could also benefit by keeping their loans within these new limits.

How Much Did Home Prices Rise in 2024?

The housing market didn't crash, despite the wild predictions from some experts last year. Instead, home prices increased by an average of 5.21% nationwide in 2024. With this continued upward trend, the FHFA raised the baseline conforming loan limit to match the market conditions.

It’s important to know that the FHFA increases these limits when home prices go up. They don’t necessarily lower them during downturns unless appreciation remains flat over time.

The New 2025 Conforming Loan Limits

For 2025, the conforming loan limit for a single-family home is now $806,500. This is a significant increase, reflecting the rise in home prices over the last decade. Ten years ago, loan limits were significantly lower, making today’s increase a crucial adjustment for current buyers.

For high-cost areas like San Francisco, Los Angeles, and New York, the limit is even higher. In some counties, buyers can finance up to $1,209,750 for a single-family home and still stay within conforming loan requirements.

These increases cater to markets where property values far exceed the national average. Keep in mind that these limits also rise for multi-unit properties, allowing for even larger loan amounts.

High-Cost Areas and Their Loan Limits

What qualifies as a "high-cost area"? These are regions where real estate prices significantly outpace the national average. Major cities like San Francisco, New York, and parts of Southern California fall into this category.

Here’s an example. While the standard single-family loan limit is $806,500, buyers in a high-cost area like New York City could access financing up to $1,209,750 without needing a jumbo loan. This flexibility is crucial for buyers in areas where $806,500 wouldn’t even cover the cost of a starter home.

Why Stay Within Conforming Limits?

It’s worth staying within conforming loan limits when possible. Here’s why:

• Lower Down Payments: Conforming loans allow first-time buyers to put as little as 3% down. Move-up buyers usually need just 5%.
• Easier Qualification: Jumbo loans require larger down payments, substantial cash reserves, and have stricter credit score requirements. Conforming loans ease these burdens.
• Simpler Underwriting: Fannie Mae and Freddie Mac set guidelines that make the lending process smoother for conforming loans.

If you’ve been holding off because you didn’t have a massive down payment, these updates could help make homeownership more realistic.

Myth-Busting: You Don’t Need 20% Down

A common misconception is that you need at least 20% down to buy a home. This belief stems from advice passed down by older generations, but it’s outdated in today’s market.

For a first-time homebuyer purchasing a $400,000 home, the minimum down payment could be just 3%, or $12,000. That’s far more approachable than saving $80,000 for a 20% down payment.

Even for higher-priced homes, today’s guidelines allow buyers to access conforming loans with relatively small down payments. The only time larger down payments are needed is for special circumstances (e.g., buying an investment property or receiving financial gifts).

Regional Differences in Loan Limits

One thing to watch out for is how loan limits vary between counties. Take Southern California as an example. In Los Angeles County, the new 2025 limit for a single-family home might be over $1.2 million. But drive a couple of hours to Riverside County, and the limit drops to $806,500

If you’re shopping in multiple areas, it’s essential to check the specific limit for each county. The last thing you want is a miscommunication with your lender over which loan type applies.

How to Look Up Your County Loan Limit

Checking your county’s loan limit is easier than ever, thanks to the FHFA’s online tool. This resource provides a breakdown by state, county, and property type (e.g., single-family or multi-unit). Knowing these details can help you avoid surprises during the homebuying process.

Multi-Unit Property Loan Limits

If you're considering buying a duplex, triplex, or fourplex, the limits get even more generous. Multi-unit properties typically have higher conforming loan caps, which makes them appealing for house hackers or investors.

For example, while the single-family limit is $806,500, a duplex could qualify for a loan over $1 million in the same area. More units mean a higher allowable loan amount, making multi-family properties an attractive option for those looking to build wealth through real estate.

FHA Loans vs. Conforming Loans

If you're planning to use an FHA loan, remember that FHA loan limits are different from conventional ones. FHA adjusts its limits annually, but they’re often lower than conforming limits. Be sure to look up FHA-specific limits for your area before moving forward with your mortgage application.

VA Loans and Loan Limits

For eligible veterans using a VA loan, the rules around loan limits differ. If you have full entitlement, there are no loan limits at all. However, if you’re keeping an existing VA loan while purchasing another property, local loan limits will apply to your maximum entitlement.

Either way, VA loans remain incredibly flexible for eligible borrowers, even if the conforming loan limits come into play in certain scenarios. Check out this Video On Va Loan limits https://youtu.be/GedDkfB9YN8

Why a Housing Crash Didn’t Happen

Many anticipated a housing crash in 2024, but the data tells another story. Instead of massive price drops, we saw stable growth at an average rate of 5.21%. While it's slower than the market frenzy of 2021 and 2022, this normalization is actually a good thing. It gives buyers breathing room while keeping homeowners’ investments safe.

Conclusion

The 2025 conforming loan limits bring positive news for homebuyers across the spectrum. Whether you're a first-time buyer, moving on to your next home, or considering an investment property, these new limits can make financing more accessible.

To make the most of these updates, research your county’s specific loan limits, especially if your home search spans multiple areas. If you're unsure where to start, tools like the FHFA’s loan limit lookup are invaluable.

Questions or ready to start the pre-approval process? Give me a call or text me at 786-933-2077 With these updates, buying a home may be closer to reality than you think!

Want to look up county loan limits ? Link in this press release https://www.fhfa.gov/news/news-release/fhfa-announces-conforming-loan-limit-values-for-2025

Video on Va Loan limits: https://youtu.be/GedDkfB9YN8



Look Up FHA Loan Limits: https://www.hud.gov/program_offices/housing/sfh/lender/origination/mortgage_limits

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