Taking rising housing prices into consideration, the Federal Housing Finance Agency is expanding the size of home loans that the government can guarantee against default.
Fannie Mae and Freddie Mac, mortgage buyers, will be able to obtain loans of up to $806,500 on single-family houses in the majority of the nation starting next year, the government announced Tuesday.
Compared to its 2024 level, the new conforming loan ceiling is 5.2% higher.
Fannie Mae and Freddie Mac, which purchase house loans from banks and other lenders and provide default guarantees, are under the supervision of FHFA. After that, the loans are combined into securities and offered for sale to investors.
However, the size of the loans that Fannie and Freddie can purchase is limited by FHFA. These loans are referred to as conforming loans, whereas jumbo loans are mortgages that exceed the conforming lending limit.
Every year, FHFA modifies conforming loan limits to account for changes in U.S. home prices, which have been increasing this year, albeit more slowly, despite a housing recession that puts U.S. home sales on course to suffer their worst year since 1995.
U.S. home prices increased 4.3% during the July–September quarter compared to the same period last year, according to the agency’s House Price Index.
According to Anju Vajja, deputy director for FHFA’s Division of Research and Statistics, the growth in U.S. home prices decreased in the third quarter, continuing a trend that began in the fourth quarter of the previous year.
A lack of available properties in many cities has kept prices rising, even though high mortgage rates have helped limit home sales.
Although the FHFA permits greater loan limitations for some states, such Alaska and Hawaii, and in counties where the local median house value is more than double the conforming loan limit, the 2025 single-family home conforming loan limit will be applicable in the majority of the nation.
For instance, starting next year, the conforming loan maximum for single-family houses in New York and Los Angeles counties will be $1,209,750.
— The Associated Press’s Alex Viega
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