Fannie & Freddie Will Back Homes Costing Nearly $1 Million

The federal government’s support for homeownership is about to expand as home prices continue to rise. Fannie Mae and Freddie Mac, are the mortgage guarantors linked to the federal government, and will back mortgages up to $806,500 starting in 2025. That's an increase of 5.2%.

Fannie and Freddie don’t lend directly. Their role is to buy the mortgages that financial institutions like banks offer borrowers. That makes it possible for lenders to offer more loans by providing a way to offload them.

Updating what are known as “conforming loan limits” is normally done each year. The limits set the top threshold for loans that can be backed by the two entities, Fannie Mae & Freddie Mac, before borrowers have to look into jumbo mortgages.

Having those loan limits raised helps a lot more people. Mortgages backed by Fannie and Freddie offer more flexibility for home buyers on things like down payments and credit requirements ,than jumbo mortgages do.

Fannie and Freddie have been in federal conservatorship since the 2008 financial crisis. They are tied to the Treasury Department.They pay the government a dividend every quarter, and in return the Treasury  backs Fannie & Freddie if they were to become insolvent. The annual loan limit increases are tied to how much home prices have risen throughout the year.

If you have been considering purchasing a home this year, it’s important to speak with a great lender and real estate agent before starting the process.  Reach out to me for your AZ and WA State Real Estate questions.

Contribution by:

Andrea Riquier

USA TODAY