High housing costs have pushed the CLL up. (iStock )
Home prices have remained high in recent years, largely due to fluctuating mortgage rates and lasting economic fallout from the pandemic. In response, conforming loan limits (CLL), which determine the size of loans borrowers can take out, will increase in 2025, the Federal Housing Finance Agency (FHFA) recently announced.
As home prices rise, the FHFA tends to increase the standard CLL. The new 2025 limit is $806,500 for single-unit mortgages in most states. Borrowers who want to take out a larger loan should opt for alternative mortgage types such as jumbo loans or private loans.
The new limit represents a 5.21% increase from 2024. This increase follows the release of the FHFA House Price Index, which showed that the average U.S. home value increased by the same amount this year.
In areas where 115% of the local average home value exceeds the CLL base value, the borrowing limit will be higher than the base value.
In places where houses cost 115% more than the usual local price, you can borrow more money than the standard CLL set for most states. Borrowing limits for single-unit properties in these areas will be $1,209,750 in 2025. Alaska, Hawaii, Guam and the U.S. Virgin Islands all have the higher base loan limit for single-unit properties.
If you think you’re ready to take out a mortgage, consider using Credible so you can easily compare interest rates from multiple lenders in minutes.
INFLATION SEEING THE LOWEST ANNUAL INCREASE SINCE 2021
Mortgage interest rates had a bumpy year, forecasts show a similar year in 2025
Mortgage rates have been active all year and have fallen and risen in recent months. Homebuyers likely won’t see much of a difference in 2025.
Zillow predicts slower home value growth, at 2.6%. This change is comparable to this year’s growth. The real estate giant also predicts an easing of mortgage rates in the new year, but is cautiously optimistic given interest rate fluctuations in 2024.
While interest rates are likely to fluctuate throughout the year, this isn’t all bad news for the housing market. Buyers may finally have the upper hand, which will likely bring more listings to the market as sellers no longer wait for high mortgage rates.
“Buying a home in 2024 was surprisingly competitive, given the high affordability threshold. More inventory should come unloaded in 2025, giving buyers some breathing room,” said Skylar Olsen, Zillow’s chief economist.
Affordability will remain an ongoing challenge in 2025, but as more homes come onto the market, buyers will have more influence during negotiations.
Consumers who want to see which loan term and rates are right for them can take advantage of Credible’s free online tools.
THE FED LOWERS INTEREST RATES AGAIN, THIS TIME BY A QUARTER PERCENTAGE POINT
The privatization of Fannie Mae and Freddie Mac could result in higher mortgage costs
The mortgage industry could see a major change during the administration of President-elect Donald Trump. During his last term, Trump tried to privatize Fannie Mae and Freddie Mac, but failed. This time, the government is optimistic that it can complete the task.
It’s difficult to fully predict what privatizing these two companies—which make about 70% of all U.S. mortgages—would do, but economists have some guesses. Allies of the president-elect have cited stakeholder benefits as a key reason for going private.
However, borrowers will likely see a significant shift in their annual mortgage costs. Economist Mark Zandi estimates that mortgage costs will rise between $1,800 and $2,800 annually if this privatization goes ahead.
The additional costs would come from the disruption of the typical system that Fannie Mae and Freddie Mac are accustomed to. Rather than issuing loans directly, the two agencies currently buy loans from lenders and combine them with securities sold to investors.
If these companies were to go private, this system would change. Investors may view mortgages as higher-risk investments because they are no longer government-backed, which would ultimately lead to higher financing costs for buyers.
If you’re trying to find the right mortgage rate, consider using Credible. Credible’s free online tool makes it easy to compare multiple lenders and check your rates in minutes.
The Supreme Court is AGAIN blocking PRESIDENT BIDEN’S RESCUE PLAN
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