Over the past several years, mortgage lenders have been offering “early bird” conforming loan limits for the upcoming year.
This allows them to make bigger loans that adhere to the underwriting guidelines of Fannie Mae and Freddie Mac without them being considered jumbo loans.
Instead of waiting until January 1st, they make a projection for where the loan limit will land the next year and offer it around the fourth quarter.
For example, in early October 2023 some lenders raised the 2024 loan limit to $750,000 ahead of the announcement that came in late November.
That loan limit wound up being $766,550, which meant the lenders who offered the higher loan limits ahead of time didn’t get caught out.
But that only worked because home prices kept on marching higher and higher.
Some Lenders Are Already Offering 2025 Conforming Loan Limits as High as $803,500
Like last year, lenders haven’t waited for the conforming loan limit announcement in late November to raise it.
And this year it has come even earlier than in years’ past. It has actually become a sort of game between competing mortgage companies to be the first out of the gate.
Rocket Pro TPO, the wholesale division of Rocket Mortgage, was first to come out with the 2025 loan limits this year.
On September 13th, they announced a limit of $802,650, up from the current limit of $766,550. This represents a 4.7% increase.
While that seems like a fairly reasonable estimate, home price appreciation has been slowing this year.
At last glance, home prices as measured by the FHFA HPI were up 4.5% from July 2023 to July 2024.
To come up with the conforming loan limit, the FHFA uses home price movement from the third quarter of the prior year to current year (see FAQ).
So we need the August and September data before they can make that determination.
Since the YoY appreciation is currently below the 4.7% needed to hit those projected 2025 loan limits, the next two releases will need to show home prices rising at a faster clip. What if they don’t?
What Happens If Home Prices Fall Short and the 2025 Loan Limits Are Lower?
Remember how I said this has become a game between lenders to see who comes out with the loan limits first? Well, it has also become a game of who goes highest.
And it appears that the nation’s largest lender, United Wholesale Mortgage (UWM), has won that battle.
They weren’t first, but they came out with the highest 2025 loan limit, offering to fund loans up to $803,500 for the remainder of 2024.
That’s a 4.8% YoY increase in home prices. Not much different than Rocket’s, but well above some other mortgage lenders who are playing it a little safer.
For example, Rate (formerly Guaranteed Rate) has only offered to go as high as $792,000, while Pennymac is only willing to go to $795,000.
Inside Mortgage Finance writer James Dohnert expressed some concern with these varying limits, noting that “it’s possible that some origination shops shot too high.”
And that if the actual 2025 loan limits come in below what these lenders are currently allowing, any of the related conforming loan production would “inherently turn into non-agency product.”
At that point, these lenders would either need to keep the loans on their books or perhaps sell them at a discount (maybe a loss) if they wished to unload them.
They wouldn’t qualify for backing by Fannie Mae or Freddie Mac, meaning they couldn’t be sold to or guaranteed by the pair.
This could present problems for the lenders who do a decent amount of volume using these new provisional loan limits.
It may also change how they offer early bird limits going forward if home prices do indeed come in lower than expected.
Given how home prices have been screaming higher and higher each year, it has yet to be a problem.
But this could finally be a turning point as housing affordability finally weighs on appreciation.
Stay tuned on this one. It might get interesting.
Which Lenders Are Already Offering 2025 Conforming Loan Limits?
CrossCountry Mortgage – $802,650
Guild Mortgage – $799,125
Movement Mortgage – $802,650
Newrez – $795,000
Pennymac – $795,000
Rate – $792,000
Rocket Mortgage – $802,650
TowneBank Mortgage – $795,000
United Wholesale Mortgage – $803,500
