2025 Conforming Loan Limits: Key Changes and How They Affect Your Mortgage

The Federal Housing Finance Agency (FHFA) has announced the 2025 conforming loan limits, with the baseline limit for a single-unit property rising to $806,500 for most of the U.S., a significant increase from 2024. In designated high-cost areas, the new limit is $1,209,750. These limits define the maximum loan size eligible for purchase by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, directly influencing mortgage accessibility and terms for most home buyers. Understanding these figures is crucial for your home financing strategy.

What Are Conforming Loan Limits?

Conforming loan limits are the maximum borrowing amounts for mortgages that can be purchased and guaranteed by Fannie Mae and Freddie Mac. These two entities do not lend money directly to consumers. Instead, they buy qualifying mortgages from lenders, package them into securities, and sell them to investors. This process provides lenders with liquidity, enabling them to offer more loans with competitive terms. Because Fannie Mae and Freddie Mac can only purchase loans at or below the conforming limit, lenders have a strong incentive to offer favorable rates and terms on these "conforming" loans. Anything exceeding this limit is classified as a jumbo loan, which comes with different requirements.

How Are the 2025 Limits Determined?

The FHFA sets conforming loan limits annually, typically in November, based on changes in the national median home price. The Housing and Economic Recovery Act (HERA) requires that the baseline limit adjust in relation to this price shift. For 2025, the increase reflects the robust appreciation in home values experienced over the past year. While most U.S. counties fall under the baseline limit, the FHFA sets higher limits for high-cost areas where 115% of the local median home value exceeds the baseline limit. This ensures that mortgage availability keeps pace with local real estate markets.

The following table outlines the complete 2025 conforming loan limits for different property sizes:

How Do Conforming Limits Impact FHA, VA, and USDA Loans?

Government-backed loans are also influenced by conforming loan limits, but the rules vary.

• FHA Loans: The Federal Housing Administration (FHA) sets its loan limits based on conforming limits. For most metropolitan statistical areas (MSAs), the FHA loan limit for a one-unit property in 2025 is 65% of the baseline conforming limit, or $524,225. In high-cost areas, the limit can be as high as 150% of the baseline, matching the high-cost conforming limit of $1,209,750.
• VA Loans: For most borrowers, the Department of Veterans Affairs (VA) does not set a maximum loan amount. Veterans and service members with their full entitlement can borrow without a strict limit. However, borrowers with a remaining entitlement may be subject to the conforming loan limits in their county.
• USDA Loans: The U.S. Department of Agriculture (USDA) does not have set loan limits for its guaranteed loan program, as it is designed for low- to moderate-income borrowers in eligible rural areas. However, your debt-to-income ratio and the program's income caps effectively limit borrowing. USDA direct loans do have specific area limits.

What Are Your Options If You Exceed the Conforming Loan Limit?

If the home you wish to purchase requires financing above your area's conforming loan limit, a jumbo loan is the primary alternative. It is important to understand that jumbo loans are considered higher risk for lenders because they cannot be sold to Fannie Mae or Freddie Mac. This results in stricter qualification criteria.

Based on our experience assessment, qualifying for a jumbo loan typically requires:

• A strong credit profile, often with a FICO score of 700 or higher.
• A lower debt-to-income (DTI) ratio to demonstrate strong repayment ability.
• A substantial down payment, frequently 20% or more of the home's purchase price.
• Significant cash reserves, enough to cover 6 to 12 months of mortgage payments after closing.

Additionally, interest rates on jumbo loans can be higher than those on conforming loans. This is not necessarily a reflection of the borrower's creditworthiness but rather the increased risk the lender retains by holding the loan in its own portfolio.

The key takeaway is to assess your financial situation carefully. While jumbo loans enable the purchase of higher-priced properties, the stricter requirements and potential for higher costs mean they are best suited for borrowers with robust financial profiles. For most buyers, securing a mortgage within the conforming loan limits provides the most accessible and affordable path to homeownership.