Loan limits will increase in the coming calendar year to keep pace with the continued appreciation of home prices over the past year.

November 26, 2024  By BUILDER Staff

The Federal Housing Administration (FHA) and Federal Housing Finance Agency (FHFA) announced their new loan limits for calendar year 2025.

The FHA announced its new loan limits for its Single Family Title II forward and Home Equity Conversion Mortgage (HECM) mortgage insurance programs, while the FHFA announced the conforming loan limit values (CLLs) for mortgages acquired by Fannie Mae and Freddie Mac in 2025.

The FHA says loan limits across most of the country will increase in 2025 due to the continued appreciation of home prices over the past year. The FHFA says, in most of the United States, the 2025 CLL value for one-unit properties will be $806,500, an increase of 5.2% from 2024 to match home price appreciation between the third quarters of 2023 and 2024. According to the FHFA, CLL values will be higher in all but six U.S. counties or county equivalents.

The FHA must update its annual loan limits each year using a formula prescribed in the National Housing Act (NHA), which uses country or metropolitan statistical area home sales data to derive new loan limits for three cost categories. Under the NHA, the FHA is required to establish its floor and ceiling loan limits based on the national conforming loan limit set by the FHFA.

“Today’s announcement of loan limit increases, calculated according to statute, enabled the FHA program to keep up with nationwide price appreciation,” says Federal Housing Commissioner Julia Gordon. “Regular adjustment of loan limits ensures that FHA financing continues to be available in all markets to all those who rely on our programs to access homeownership.”

The FHA’s 2025 minimum national one-unit loan floor of $524,225 is set at 65% of the national conforming loan limit. The floor applies to those areas where 115% of the median home price is less than the floor limit.

Any area where the loan limit exceeds this floor is considered a high-cost area. The maximum loan limit for high-cost areas is $1,209,750, which is 150% of the national conforming loan limit. Forward mortgage limits for the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands are adjusted further by FHA to account for higher costs of construction.

Two-unit properties’ low-cost area floor is $671,200, and the high-cost ceiling is $1,548,975, with the ceiling for special exception areas of Alaska, Hawaii, Guam, and the U.S. Virginia Islands at $2,323,450. Three-unit properties’ low-cost area floor is $811,275, and the high-cost area ceiling is $1,872,225, with special exception areas’ ceiling at $2,808,325.

For properties with four units, the low-cost area floor is $1,008,300, the high-cost area ceiling is $2,326,875, and the special exception areas have a ceiling of $3,490,300.

Beginning with FHA case numbers assigned on or after Jan. 1, the HECM maximum claim amount will increase to $1,209,750 from $1,149,825. The maximum claim amount applies to all areas, including the special exception areas.