Loan Limits: What First-Time Buyers Should Know

What are loan limits?

A loan limit is the maximum amount you can borrow under a specific mortgage program. Each year, federal housing agencies set new limits based on changes in home prices across the country.

For most homebuyers, loan limits matter because they determine whether your mortgage is considered conforming or non-conforming.

Conforming loans fall within the limits set by the Federal Housing Finance Agency (FHFA) and can be purchased by government-sponsored enterprises like Fannie Mae and Freddie Mac.

Non-conforming loans, often called jumbo loans, exceed those limits. They aren’t backed by Fannie Mae or Freddie Mac and usually require higher credit scores, larger down payments, and stronger financial profiles.

Staying within conforming limits can make it easier for first-time buyers to qualify, especially if they plan to use a smaller down payment or a government-backed loan program.

How loan limits are determined

Loan limits aren’t one-size-fits-all. The FHFA sets the baseline conforming loan limit each year, adjusting it according to average home price growth in the U.S. housing market. For 2025, the national baseline conforming loan limit for a single-family home is $806,500.

However, many areas have higher local limits because home prices vary significantly across the country. Counties with higher median home prices, such as parts of California, New York, and Hawaii, are designated as high-cost areas, where limits can be up to 150% of the baseline, or $1,209,750 in 2025.

Loan limits by property type

Loan limits also depend on the number of units in the property you plan to buy. Typically, the more units a home has, the higher the loan limit. This extended ceiling is because the property can generate additional income or accommodate more residents.

Those limits can increase significantly in high-cost areas. For example, a four-unit property in a high-cost county could qualify for a loan up to $2.3 million under current FHFA guidelines.

Loan limits and FHA loans

FHA-backed loan limits are set each year based on a percentage of the conforming loan limits. FHA limits are divided into three categories:

Low-cost areas: The maximum FHA loan limit (or “ceiling”) for 2025 is $524,225.
High-cost areas: The FHA loan ceiling for 2025 is $1,209,750.
Special exception areas: Certain markets, like Alaska, Hawaii, Guam, and the U.S. Virgin Islands, have higher caps due to unique housing costs.

Like conventional limits, FHA loan caps vary by county and property type. FHA limits also scale upward for two-, three-, or four-unit properties.

Keep in mind that the FHA also typically requires you to occupy the home as your primary residence for at least the first year. This requirement applies to multi-unit properties as well.

So, even if you’re a first-time buyer, you may be able to use an FHA loan to purchase a small multifamily property if you occupy one of the units as your primary residence.

Loan Limits and VA or USDA Loans

Just like FHA loans, VA or USDA-backed mortgages also have guidelines for loan limits, but they work a little differently.

VA loans
The VA loan program is available to eligible veterans, active-duty service members, and certain surviving spouses. One of its biggest advantages is that no formal loan limits exist for borrowers with full VA entitlement. That means qualified applicants can borrow beyond the conforming loan limit without a down payment, as long as the lender approves the amount and the borrower meets credit and income requirements.

However, if you’ve used your VA entitlement before and still have part of it tied up in another property, your loan amount may be capped by local FHFA conforming limits. In that case, your lender can help calculate how much of your entitlement remains.

USDA loans
USDA loans, intended for homes in eligible rural or suburban areas, are designed to promote affordable housing in lower-density communities. Instead of traditional loan limits, the USDA bases eligibility on income caps that vary by county and household size. These income limits help ensure the program serves low- to moderate-income buyers.

The amount you can borrow with a USDA loan is determined by your income, debt-to-income ratio, and the property’s appraised value. Since USDA loans don’t require a down payment, staying within local income thresholds is key to qualifying.

How loan limits affect your financing options

Understanding loan limits can help you identify which mortgage programs you qualify for and how much you can comfortably borrow.

Here’s how loan limits may influence your financing decisions:

Determining your loan type
If your desired loan amount falls within the FHFA limits, you’ll likely qualify for a conforming loan, which typically offers lower rates and easier qualification standards. If your loan amount exceeds that limit, you’ll likely need a jumbo loan.
Comparing FHA, VA, USDA, and conventional loans
Loan limits vary across different mortgage programs, or they may not exist for some programs. FHA loans have county-specific caps based on local home prices which determine how much you can borrow while still qualifying for FHA’s lower down payment options.

A conventional loan may be a better fit if your target home price exceeds your local FHA limit but remains within conforming limits. For eligible buyers, VA or USDA loans may provide additional flexibility and cost savings without requiring loan limits or large down payments.

Budgeting for your price range
Knowing your county’s loan limits early helps you set realistic expectations for your home search. If home prices in your desired area exceed FHA or conforming limits, you may need to save a larger down payment to stay within an affordable range.

How to check your area’s loan limits

Before you start house hunting, take a few minutes to research your local limits. Here’s how:

Visit the FHFA Conforming Loan Limits Map: Use the FHFA Conforming Loan Limit Values Map to find the conforming loan limit for your county.
Check the U.S. Department of Housing and Urban Development (HUD) FHA Loan Limit page: FHA limits are searchable by state, county, or Metropolitan Statistical Area at the HUD FHA Mortgage Limits page.
Ask your lender: Local lenders can confirm current limits and help you understand how they apply to your financial situation.

Planning your purchase with confidence

Loan limits may not be the most exciting part of buying a home, but they’re one of the most important to understand. They determine what you can borrow, which loan programs you can use, and what type of financial preparation you’ll need.

For first-time buyers, knowing your county’s limits and how they vary by property type helps you set a realistic price range and choose the right financing path. Whether you stay within FHA’s more flexible caps or qualify for a conforming loan, understanding loan limits ensures your home search starts with confidence.

Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a mortgage professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.

Editor’s Note: The opinions expressed here by the authors are their own, not those of impakter.com — In the photo: Three EU flags waving, Oct. 25, 2023. Cover Photo Credit: Carl Gruner