For the past several years, mortgage lenders have been offering conforming loan limits to “early fly” for the coming year.
This allows them to make larger loans that adhere to Fannie Mae and Freddie Mac’s underwriting guidelines without being considered jumbo loans.
Instead of waiting until January 1, they make projections about where the loan limit will be next year and present them around the fourth quarter.
For example, in early October 2023, some lenders raised the 2024 loan limit to $750,000 before the announcement came in late November.
This loan limit ended up being $766,550, meaning lenders who offered higher loan limits early on went undetected.
But this only worked because housing prices continued to rise more and more.
Some lenders already offer 2025 conforming loan limits of up to $803,500.
As was the case last year, lenders did not wait for the conforming loan limit announcement in late November to raise it.
This year came earlier than in previous years. It has actually become a game between competing mortgage companies to be the first out of the gate.
Rocket Pro TPO, the wholesale division of Rocket Mortgage, was the first to announce 2025 loan limits this year.
On September 13, they announced a cap of $802,650, up from the current cap of $766,550. This represents an increase of 4.7%.
Although this seems like a fairly reasonable estimate, the rise in home prices has slowed this year.
At last glance, home prices are measured by the FHFA HPI It rose by 4.5% from July 2023 to July 2024.
To arrive at the conforming loan limit, the FHA uses the movement of home prices from the third quarter of the previous year to the current year (See frequently asked questions).
So we need August and September data before they can make that decision.
Since the year-over-year rise is currently below the 4.7% needed to reach projected 2025 loan limits, the next two releases will need to show home prices rising at a faster rate. What if they don’t?
What happens if home prices fall and loan limits for 2025 are lower?
Remember how I said this became a game between lenders to see who would come up with the loan limits first? Well, it’s also become a game of who can reach the highest level.
The country’s largest bank, United Wholesale Mortgage (UWM), appears to have won that battle.
They weren’t the first, but they came out with the highest loan limit for 2025, offering to finance loans up to $803,500 for the remainder of 2024.
This represents a 4.8% year-on-year increase in house prices. Not much different from Rocket, but much higher than some other mortgage lenders who play it safer.
For example, the bid (previously guaranteed price) is only $792,000, while Pennymac is only willing to go to $795,000.
Inside real estate finance writer James Donnert He expressed some concern With these varying limits, he noted, “It is possible that some construction shops could have achieved a significant increase.”
And that if the actual 2025 loan limits come in lower than those lenders currently allow, any related conforming loan production “would inherently shift to non-agency product.”
At that point, these lenders will need to either keep the loans on their books or perhaps sell them at a discount (possibly a loss) if they want to dispose of them.
They will not be eligible for backing from Fannie Mae or Freddie Mac, which means they cannot be sold or guaranteed by them.
This could present problems for lenders who do a fair amount of volume using these new temporary loan limits.
It may also change how early bird limits are offered going forward if home prices actually come in lower than expected.
Since housing prices rise every year, this is not yet a problem.
But this could finally be a turning point as housing affordability eventually influences rising interest rates.
Stay tuned for this one. This could get interesting.
Which lenders are already offering 2025 conforming loan limits?
Cross Country Mortgage – $802,650
Syndication Mortgage – $799,125
Convertible Mortgage – $802,650
Newroz – $795,000
Pennymack – $795,000
Price – $792,000
Rocket Mortgage – $802,650
TowneBank Mortgage – $795,000
United Wholesale Mortgage – $803,500
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