{"id":179599,"date":"2024-12-09T17:20:12","date_gmt":"2024-12-10T00:20:12","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=179599"},"modified":"2024-12-09T17:20:15","modified_gmt":"2024-12-10T00:20:15","slug":"fannie-mae-increases-loan-coverage-for-2025","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/fannie-mae-increases-loan-coverage-for-2025","title":{"rendered":"Fannie Mae Expands Coverage, Raising Loan Limits By 5.2%"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you want to buy a million-dollar home and have enough for a <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/down-payment\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">down payment<\/span><\/a><span data-preserver-spaces=\"true\">, you can now ask Uncle Sam for the rest.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">That&#8217;s <\/span><span data-preserver-spaces=\"true\">probably<\/span><span data-preserver-spaces=\"true\"> an oversimplification, but if you think of government-backed loans to finance single-family homes, you likely think of modestly priced residences for the middle class.<\/span><span data-preserver-spaces=\"true\"> However, the federal government is <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fhfa.gov\/news\/news-release\/fhfa-announces-conforming-loan-limit-values-for-2025\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">expanding its loan limits<\/span><\/a><span data-preserver-spaces=\"true\"> through Fannie Mae and Freddie Mac-backed mortgages\u2014offering loans to the conforming loan limit value of $806,500, starting in January 2025. That&#8217;s a marked increase of 5.2% from 2024 levels.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">A conventional down payment of 20% means you can buy a million-dollar home backed by government financing. The move reflects escalating home prices, which have edged many Americans out of ownership.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">&#8220;I think it&#8217;s practical for (Fannie and Freddie) to meet the market where it&#8217;s at,&#8221; Molly Goodman, co-founder of Abundant Housing Massachusetts, a housing advocacy organization, told <\/span><em><a class=\"editor-rtfLink\" href=\"https:\/\/www.usatoday.com\/story\/money\/personalfinance\/real-estate\/2024\/11\/26\/fannie-freddie-back-million-dollar-homes\/76459040007\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">USA Today<\/span><\/a><\/em><span data-preserver-spaces=\"true\">. &#8220;We still need financial products that can serve the market, but we need to recognize that this is not sustainable.&#8221;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How Fannie and Freddie Work<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you can&#8217;t remember taking a mortgage out directly through Fannie Mae or Freddie Mac, that&#8217;s because you haven&#8217;t. Government-sponsored enterprises (GSE) provide mortgage financing and help make homeownership more accessible. They do this by buying mortgages from lenders, who then have more money to help other buyers, thus providing liquidity in the market and keeping housing stable and affordable.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">&#8220;Having those loan limits raised helps a lot more people. It makes it a lot easier, especially for us as lenders,&#8221; David Horvath, vice president and senior mortgage loan officer with Meridian Bank, said in the <\/span><em><span data-preserver-spaces=\"true\">USA Today<\/span><\/em><span data-preserver-spaces=\"true\"> article. Mortgages backed by Fannie and Freddie offer more flexibility for applicants on things like down payments and credit profiles than jumbo mortgages do, Horvath added.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">A Governmental Safety Net for Loans<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Fannie and Freddie had to be bailed out by the government during the 2008 financial crash and has been in federal conservatorship <\/span><span data-preserver-spaces=\"true\">ever<\/span><span data-preserver-spaces=\"true\"> since\u2014though <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fhfa.gov\/conservatorship\/senior-preferred-stock-purchase-agreements\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">amendments were made<\/span><span data-preserver-spaces=\"true\"> in 2021<\/span><\/a><span data-preserver-spaces=\"true\">. They are tied to the Treasury Department, funded by the American taxpayer, and pay quarterly dividends for the privilege. In return, the government steps in to help them in times of financial difficulty\u2014as <\/span><span data-preserver-spaces=\"true\">is what<\/span><span data-preserver-spaces=\"true\"> happened in 2008.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The Federal Housing Finance Agency\u2019s (FHFA) annual loan limits are tied to national home prices and adjusted accordingly and publicly. The correlation is simple: The 5.21% increase in the home price index between the third quarter of 2023 and 2024 resulted in loan limits changing by the same amount\u2014the new single-family upper limit of $806,500. The loan limits increase when <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.housingwire.com\/articles\/fhfa-conforming-loan-limits-increase-to-806500-in-2025\/#:~:text=The%20Federal%20Housing%20Finance%20Agency,mortgages%20up%20to%20this%20amount.\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">local median prices are more expensive<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">FHA Rules for Flippers<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">For <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/guides\/how-to-flip-houses\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">flippers<\/span><\/a><span data-preserver-spaces=\"true\">, increasing loan limits for Freddie and Fannie financing opens up another category of homebuyers who may <\/span><span data-preserver-spaces=\"true\">not<\/span><span data-preserver-spaces=\"true\"> have <\/span><span data-preserver-spaces=\"true\">been<\/span><span data-preserver-spaces=\"true\"> previously eligible.<\/span><span data-preserver-spaces=\"true\"> It allows investors to look for homes in competitive areas more confidently, knowing that end buyers with less-than-stellar credit scores or lower down payments might still be able to buy a <\/span><span data-preserver-spaces=\"true\">home<\/span><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">However, there are <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.dsldmortgage.com\/blog\/fha-flipping-rules-understanding-the-90-day-rule-and-its-implications\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">certain<\/span><span data-preserver-spaces=\"true\"> rules<\/span><\/a><span data-preserver-spaces=\"true\"> flippers must adhere to when selling to buyers who <\/span><span data-preserver-spaces=\"true\">are preapproved<\/span><span data-preserver-spaces=\"true\"> for an FHA mortgage. These are:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">There has to be a 90-day seasoning period between buying and selling a home to an FHA-approved buyer. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> prevents <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-224\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">wholesalers<\/span><\/a><span data-preserver-spaces=\"true\"> from doing double closings and safeguards buyers from <\/span><span data-preserver-spaces=\"true\">buying<\/span><span data-preserver-spaces=\"true\"> homes with minimal renovation<\/span><span data-preserver-spaces=\"true\">, but it<\/span><span data-preserver-spaces=\"true\"> should <\/span><span data-preserver-spaces=\"true\">not present an issue<\/span><span data-preserver-spaces=\"true\"> for flippers who have done <\/span><span data-preserver-spaces=\"true\">major<\/span><span data-preserver-spaces=\"true\"> renovation work.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">If the home is <\/span><span data-preserver-spaces=\"true\">being sold<\/span><span data-preserver-spaces=\"true\"> for more than the flipper paid for it between 91 and 180 days after acquisition, <\/span><span data-preserver-spaces=\"true\">a second appraisal (conducted by an FHA-approved appraiser) must be <\/span><span data-preserver-spaces=\"true\">conducted<\/span><span data-preserver-spaces=\"true\">. The buyer cannot pay for the second appraisal; the seller\/flipper must bear the cost.<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">FHA approvals are synonymous with red tape, <\/span><span data-preserver-spaces=\"true\">onerous<\/span><span data-preserver-spaces=\"true\"> document checks, and expenses that can delay a closing. So, knowing this ahead of time or working with an efficient, approved FHA mortgage broker to streamline the process and address any foreseeable issues upfront will help an experienced flipper get to the finish line.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Mortgage Competition Heats Up<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Nonbanks\u2014online lenders such as Rocket Mortgage, PennyMac, and United Wholesale Mortgage\u2014have already increased their conforming loan limits ahead of the FHFA&#8217;s official announcement, which is standard each autumn. These lenders compete with Fannie and Freddie-associated lenders, so FHFA has to compete by increasing their limits accordingly.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">An Uncertain Future<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">According to the<\/span> <em><a class=\"editor-rtfLink\" href=\"https:\/\/www.wsj.com\/politics\/policy\/trump-allies-are-working-on-plans-to-privatize-fannie-and-freddie-a9c4e5ff\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wall Street Journal<\/span><\/a><\/em><span data-preserver-spaces=\"true\">, the incoming Trump administration plans to privatize Fannie Mae and Freddie Mac. Government stakes in the two lending institutions are estimated to be <\/span><span data-preserver-spaces=\"true\">in the<\/span><span data-preserver-spaces=\"true\"> hundreds of billions of dollars, allowing bankers to sell over $100 billion worth of shares at once. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> would create <\/span><span data-preserver-spaces=\"true\">the<\/span> <span data-preserver-spaces=\"true\">biggest<\/span><span data-preserver-spaces=\"true\"> stock and bond offerings <\/span><span data-preserver-spaces=\"true\">in history<\/span><span data-preserver-spaces=\"true\"> and attract sovereign-wealth funds.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Critics fear such a <\/span><span data-preserver-spaces=\"true\">large<\/span><span data-preserver-spaces=\"true\"> investment buy-in could destabilize the U.S. housing market, which relies heavily on FHFA backing. About 40% of the $435 billion of residential loans originated in the second quarter of 2024 were sold to Fannie or Freddie, according to Inside Mortgage Finance, not including multifamily mortgage debt (of which 40% is $2.2 trillion).&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Advocates of privatization point to it as a way to reduce the deficit. At the same time, opponents fear it will decrease access to credit for homebuyers and increase the risk for taxpayers, <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/finance.yahoo.com\/news\/housing-clash-coming-involving-two-154516884.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAJ6jl9mDKTyhfVkI9vHov_Mn8uKXS1FHhnZvN_Y_ujeTkaqn4BnywAHiJ1izqEubCCSnBiu4z2bswG_Kd-zwRvH9HpAqXu8HzneengaTpPYLdIS1-1l_LBmTUcBJJHFJ_8ZjEIfHHTx3SOVlwnNiQiNif4bYZaqOhOYtI6RYgGw4\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">sending mortgage costs<\/span><\/a><span data-preserver-spaces=\"true\"> skyward.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">&#8220;The conservatorship <\/span><span data-preserver-spaces=\"true\">was always intended<\/span><span data-preserver-spaces=\"true\"> to be temporary, so it makes sense that policymakers release them from conservatorship now that reforms are complete,&#8221; a spokesman for billionaire John Paulson\u2014a Trump backer and hedge fund manager who owns a sizable share of Fannie and Freddie shares\u2014said in a <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wsj.com\/politics\/policy\/trump-allies-are-working-on-plans-to-privatize-fannie-and-freddie-a9c4e5ff\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">statement<\/span><\/a><span data-preserver-spaces=\"true\">. &#8220;The government will be the biggest winner in a release of [Fannie and Freddie].&#8221;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Any sale of Fannie and Freddie\u2014<\/span><span data-preserver-spaces=\"true\">which were<\/span><span data-preserver-spaces=\"true\"> created by Congress\u2014needs to benefit the mortgage and housing industry and enable the public to obtain safe, securitized loans in tandem with escalating home prices, as recently demonstrated.<\/span><span data-preserver-spaces=\"true\"> Whether that transpires remains to be seen. What&#8217;s not up for debate is that Fannie and Freddie have played an integral part in propping up home lending during its most turbulent times, providing liquidity, stability, and affordability.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Investors have relied on these loans for <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily<\/span><\/a><span data-preserver-spaces=\"true\"> purchases as landlords, while flippers and homebuilders have used Fannie and Freddie to sell homes to owner-occupants. The secondary mortgage market relies on Fannie Mae and Freddie Mac to provide mortgage-backed securities (MBS), reducing the cost of borrowing for affordable housing. The increased loan limits allow borrowers\u2014owner-occupants and investors looking to rent out homes after living in them\u2014 to remain competitive and buy homes at their current market value.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Given the current housing crisis, a strong, functioning Freddie and Fannie <\/span><span data-preserver-spaces=\"true\">are needed<\/span><span data-preserver-spaces=\"true\"> now more than ever.<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_29c95648608c1324a6c103df37388388\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_798f0497e22926132fd7573704995388\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size wp-block-paragraph\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color wp-block-paragraph\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<div id=button-custom-event-block_8e042e8afb982564a72408987914187d class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/fannie-mae-increases-loan-coverage-for-2025&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color wp-block-paragraph\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/fannie-mae-increases-loan-coverage-for-2025&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>If you want to buy a million-dollar home and have enough for a down payment, you can now ask Uncle Sam for the rest.&nbsp; That&#8217;s probably an oversimplification, but if [&hellip;]<\/p>\n","protected":false},"author":613725,"featured_media":179601,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-179599","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/179599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=179599"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/179599\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/179601"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=179599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=179599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=179599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}