Freddie Mac and Fannie Mae to Purchase Home Loans Worth up to $806,500
The decision could allow potential home buyers in the United States to purchase higher-priced homes.
Freddie Mac and Fannie Mae are set to acquire mortgages with higher values in 2025 to accommodate the increase in home prices from the previous year.
The FHFA noted that home prices rose by 5.21% between Q3 2023 and Q3 2024, prompting the agency to raise the conforming loan limit by the same percentage.
Mortgages within the FHFA’s set limits are called conforming loans, which are typically more affordable and easier to obtain for buyers compared to non-conforming loans. In 2023, the conforming loan limit was $766,550.
The updated higher limit means that buyers can now purchase more expensive homes and still qualify for conforming loans as long as the mortgage amount does not exceed $806,500.
This new limit applies to most of the United States, except in designated “high-cost” regions.
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Some counties in states such as New Hampshire, Massachusetts, Tennessee, Colorado, Utah, Washington, New York, New Jersey, Florida, and California will have limits ranging from $806,500 to just over $1.2 million.
In Hawaii, Alaska, U.S. Virgin Islands, and Guam, the limit for one-unit properties is set at 150% of $806,500, totaling around $1.2 million.
Loans exceeding the FHFA-prescribed limits are known as jumbo loans and come with higher interest rates. Freddie Mac and Fannie Mae are not permitted to purchase such loans.
“For home builders, this change means their clients will have more mortgage options beyond jumbo loans, potentially prompting home builders to reevaluate their pricing.”
Affordability Situation
The FHFA decided to increase loan limits for Freddie Mac and Fannie Mae mortgages due to the surging home prices in recent years.
“As of this summer, a household needs to earn $77,000 per year to afford the median-priced starter home.”
The FHFA recently highlighted that the U.S. housing market has witnessed year-over-year price growth in every quarter since 2012.
“While house prices continued to rise due to high housing demand outpacing fixed housing supply, the elevated house prices and mortgage rates likely contributed to the slowdown in price growth,” she explained.
The company forecasts “2.6% home value growth in 2025, a relatively slow pace similar to this year’s growth. For existing home sales, Zillow predicts 4.3 million for the upcoming year, slightly higher than 4.1 million in 2023 and an estimated 4 million in 2024.”
“While affordability challenges persist, buyers should expect more homes on the market, providing more time to assess options and increased negotiation leverage,” as mentioned in the report.
Regarding mortgage rates, Zillow suggests a potential decrease next year. It anticipates fluctuations in rates, possibly leading to higher refinancing activity during periods of lower rates.
