The U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) has detailed the new loan limits for its Single Family Title II forward and home equity conversion mortgage (HECM) insurance programs, to go into effect for 2025. The agency stated loan limits for most of the country will increase in the coming year because of the continued appreciation of home prices over the past year.
FHA must update its annual loan limits each year using a formula prescribed in the National Housing Act (NHA). This formula uses county or metropolitan statistical area home sale data to derive new loan limits for the three cost categories established by the law. Under the NHA, FHA establishes its floor and ceiling loan limits based on the national conforming loan limit set by the Federal Housing Finance Agency for conventional mortgages owned or guaranteed by Fannie Mae and Freddie Mac.
This floor applies to those areas where 115 percent of the median home price is less than the floor limit, HUD stated. Any area where the loan limit exceeds this floor is considered a high-cost area. In these areas, FHA establishes varying loan limits above the floor based on the respective median home prices in each area. The NHA requires FHA to set its maximum loan limit ceiling for a one-unit property for high-cost areas at 150 percent 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.
The new forward mortgage loan limits will be effective for FHA case numbers assigned on or after Jan. 1, 2025. Notably, the maximum loan limits for FHA forward mortgages will increase in 3,151 counties.
For one-unit properties, the low-cost area minimum will be $524,225, the high-cost area maximum will be $1,209,750, and for special exception areas, $1,814,625. Numbers, respectively, for two units will be $671,200, $1,548,975, and $2,323,450; for three units $811,275, $1,872,225, and $2,808,325; and four units $1,008,300, $2,326,875, and $3,490,300.
The HECM maximum claim amount will increase from $1,149,825 in 2024 to $1,209,750 for FHA case numbers assigned on or after Jan. 1, 2025. This maximum claim amount applies to all areas, including the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
“[This] announcement of loan limit increases, calculated according to statute, enables the FHA program to keep up with nationwide price appreciation,” Federal Housing Commissioner Julia Gordon said in a release. “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.”