December Real Estate Roundup: New 2025 Loan Limits in Effect

Hard to believe 2024 is coming to a close, but there’s good news to share! Let’s take a quick look at the industry as we prepare for a new year.  

New 2025 Conventional Loan Limits  

The new Federal Housing Finance Agency (FHFA) conforming loan limits are official – $806,500 for one-unit properties in most regions, and $1,209,750 (the “high-balance limit”) for pricier areas like Northern Virginia, for example. Atlantic Bay is already honoring these limits. 

This is great news for your buyers because it gives them more flexible lending terms and down payment options for larger loan amounts. In other words, now they can buy an $848,000 property with only 5% down, whereas just last month, they would have had to put nearly 10% down for the same priced house, saving them nearly $40k cash out of pocket. 

Conforming Versus Conventional 

A quick reminder: the terms “conforming” and “conventional” are often used interchangeably, but there are some differences. All conforming loans are conventional loans, but conventional loans can be conforming or non-conforming, which means they don’t meet Fannie/Freddie funding criteria.

This isn’t a bad thing! Non-conforming loans can be jumbo loans for more expensive properties, or non-qualified (non-QM) mortgages specially designed for people who don’t meet a traditional qualifying profile (think a self-employed “gig” worker). Non-conforming loans are great for the right clients and have their own advantages. For example, we can offer ARMs on many of our jumbo products, in addition to 30-year fixed rates, which are very competitive for borrowers with excellent credit. 

What About Government Loan Limits? 

Non-conforming loans also include government-backed loans like FHA – and HUD has just raised the 2025 one-unit FHA “floor” limit to $524,225, “ceiling” limit to $1,209,750, with other limits depending on location – Hampton Roads is $757,850, for example. We’re honoring these limits already as well, for case numbers as of January 1.

VA loans don’t have loan limits for borrowers with full entitlement. For eligible Veterans with partial entitlement, seeking loans of more than $144,000, loan limits do come into play. (Ask me for more information). 

Finally, USDA loan limits are based on region. The 2025 USDA income limits, however, have increased to $112,450 for a family of 1-4 members. 

PS – Atlantic Bay is now accepting minimum credit scores of 580 for government loans that meet certain criteria. Ask me for details! 

More Rate Cuts Coming? 

In September and November, the Fed lowered the short-term, Fed Funds rate. However, because of the fear of future inflation, 30-year fixed-rate mortgage rates actually increased from October to mid-November. (PS: This is a great reminder not to post that “rates have dropped” – it’s not quite that simple).

Mortgage rates have improved some since then but continue to trade based on what they expect inflation to do over the coming year. The Fed lowered the short-term rate again on December 18th by another 25 basis points; however, the number of cuts in 2025 is now the big question mark. If the Fed can manage the short-term rate to help keep inflation down as we head into next year, that will be a positive for mortgage rates. There is still a housing shortage, and buyer demand is expected to continue to be strong in 2025, so as long as rates do not spike, we should continue to see improved buyer and seller activity in the new year. 

And as you know, holiday times can mean less competition, more availability of services like movers, and time off from work to look for homes. I’d love to help your clients start 2025 in a new home – just reach out!