If you are hoping to buy a home in 2025, you’re probably curious about what the experts are saying about the state of the housing market this year.
Lawrence Yun, chief economist of the National Association of REALTORS®, recently made a few predictions about what to expect in 2025 and 2026:
- Sales projection, 2025: Existing home sales to rise 9 percent year-over-year; new home sales to jump by 11 percent
- Sales projection, 2026: Existing home sales to rise 13 percent year-over-year; new home sales to increase by 8 percent
- Median home price, 2025: $410,700; up 2 percent over 2024
- Median home price, 2026: $420,000, up 2 percent over 2025
Although we aren’t seeing real downward movement in mortgage interest rates yet, the Federal Reserve may lower interest rates over the course of the year, which could stimulate an increase in home sales in 2025.
However, there is some good news for homebuyers. Conforming loan limits increased in 2025, which can potentially save you a significant amount of money over the life of your mortgage.
Here’s what you need to know.
Understanding Conforming vs. Nonconforming Loans
So what exactly is a conforming loan, and how can it save homebuyers money in today’s uncertain housing market?
Essentially, a conforming loan is a conventional loan under a specified dollar amount that is backed by Fannie Mae and Freddie Mac. Conforming loan limits are set each year by the Federal Housing Finance Agency (FHFA) based on their House Price Index (HPI).
Nonconforming loans are mortgage loans that fall outside of standard Fannie Mae and Freddie Mac guidelines, including jumbo loans and government-backed mortgages such as Federal Housing Administration (FHA), United States Department of Agriculture (USDA), and Department of Veterans Affairs (VA) loans.
Factors that influence whether you qualify for a conforming or nonconforming loan include:
- Credit history
- Credit score
- Debt-to-income ratio
- Down payment
- Loan size
What Are the Conforming Loan Limits for 2025?
The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limits for Fannie Mae and Freddie Mac be adjusted each year to reflect the change in the average US home price.
The most recent FHFA HPI reports that house prices increased an average of 5.21 percent between Q3 2023 and Q3 2024. As a result, the 2025 baseline conforming loan limit also increased by 5.21 percent.
For homebuyers in average-cost areas, the 2025 baseline loan limits increased from $766,550 to $806,500 (+$39,950). However, in high-cost counties (where 115 percent of the median home value is higher than the baseline loan limit) the conforming loan limit increased from $1,149,825 to $1,209,750 (+$59,925) in 2025.
What Does the Increase in the 2025 Conforming Loan Limit Mean for You?
The increase in conforming loan limits is good news for homebuyers looking to make a move in 2025.
With the current elevated home prices and increasing interest rates, conforming loans can save qualified buyers a significant amount of money in both the short and long term by offering lower down payment requirements and lower interest rates than they’ll get with many nonconforming loans.
For example, a first-time homebuyer in an average-cost county may be able to borrow up to $806,500 at an interest rate of about 6.9 percent with only 3 percent down. Buyers in high-cost counties will potentially see huge savings with a conforming loan because they only require 5 percent down, compared to as much as 20 percent down for a jumbo loan.
The 2025 loan limit increase also benefits those who purchased a house for more than the previous conforming loan limit. These homeowners may be able to refinance at the new limit and remove private mortgage insurance (PMI) from their monthly payments.
As with any loan, borrowers must meet certain qualifications to get the lowest rates and largest loans. In the case of conforming loans, the factors that have the most impact are your credit history, credit score, and debt-to-income ratio.
Ready to Take Advantage of the Conforming Loan Limit 2025 Increase?
Higher conforming loan limits are welcome news for homebuyers in today’s uncertain market. Whether you are ready to take advantage of today’s higher loan limits while waiting for interest rates to drop or just want to learn how to make higher conforming loan limits work for you, we would love to talk.
Contact us, and a member of our highly experienced FFB Mortgage Lenders team will be in touch to help you get started down the path to homeownership, relocation, or refinancing.
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