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The Federal Housing Finance Agency (FHFA) has set a new baseline conforming loan limit of $806,500 for one-unit properties in 2025, authorizing Fannie Mae and Freddie Mac to purchase mortgages up to this amount.
The new limit reflects a 5.2% increase over the current $766,550 cap for 2024, aligning with home price trends. The adjustment indicates a weaker housing market this year, driven by still-elevated mortgage rates. By comparison, the 2024 limit rose by 5.5%.
Raising the conforming loan limit helps buyers finance higher-priced one-unit homes more efficiently, especially as affordability remains challenging. However, these increases also spark ongoing debate over whether government-backed mortgages should cover amounts nearing $1 million—a threshold first reached in 2022.
That’s the case for areas where 115% of the local median home value exceeds the baseline conforming loan limit value, where the Housing and Economic Recovery Act (HERA) establishes the ceiling at 150% of the baseline limit. Ultimately, the new ceiling loan limit for one-unit properties will be $1,209,750.
In addition, special statutory provisions establish different loan limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit for one-unit properties is $1,209,750.
Will lenders’ bets pay out?
For some lenders, next year may bring little change as nonbanks have already raised their conforming loan limits ahead of the FHFA’s official announcement—an increasingly common autumn practice. However, the adjustment bets varied among different competitors.
In September, Rocket Pro TPO (the wholesale arm of Rocket Mortgage) and Pennymac set their limits to $802,650, while United Wholesale Mortgage (UWM) opted for a slightly higher $803,500 level. Loans exceeding the FHFA’s official limit will enter the jumbo market, primarily handled by banks.
These preemptive adjustments reflect the fierce competition in a mortgage market just beginning to recover from recent declines. Companies face mounting pressure to introduce new initiatives to attract brokers and capture more purchase business.
Conforming loan limits adjust each year according to a formula based on third-quarter home price data. The 2008 Housing and Economic Recovery Act mandates that the baseline can only rise after home prices return to pre-recession levels.
That condition was met eight years later, in 2016, when the FHFA increased conforming limits for the first time in a decade. Importantly, even if home prices fall, the ceiling doesn’t decrease; however, it rises whenever home prices increase year-over-year.
Here are the increases in FHFA’s conforming loan limit for one-unit loans for the lower 48 states since 2016.
- 2016: $417,000
- 2017: $424,100 — 1.7% increase
- 2018: $453,100 — 6.8% increase
- 2019: $484,350 — 6.8% increase
- 2020: $510,400 — 5.3% increase
- 2021: $548,250 — 7.4% increase
- 2022: $647,200 — 18% increase
- 2023: $726,200 — 12.2% increase
- 2024: $766,550 — 5.5% increase
