The Loan Limits for Government-Backed
Mortgages
Updated March 15, 2022
Congressional Research Service
https://crsreports.congress.gov
R44826

The Loan Limits for Government-Backed Mortgages

Summary
The federal government supports homeownership in different ways. One of the main ways is
through programs or quasi-government entities that promise lenders or investors that if a
homeowner defaults on a covered mortgage, the lender or investor will still receive someâ€”or
allâ€”of the amount it was owed. These types of guarantees can support homeownership by
making private lenders more willing to offer certain types of mortgages. Additionally, they can
increase the number of private investors who are willing to invest in mortgages, thereby
increasing the amount of capital available for mortgage lending. The details of the programs
differ, but most have maximum limits on the size of mortgages that are eligible. This report
contains brief program descriptions and discusses the maximum guarantee amounts for each.
The government or quasi-government entities that insure or guarantee mortgages and are
discussed in this report are the following:
ï‚· Fannie Mae and Freddie Mac. Lenders sell mortgages to Fannie Mae and
Freddie Mac, which are congressionally chartered government-sponsored
enterprises (GSEs). These mortgages are called conforming loans because they
conform to Fannie Maeâ€™s and Freddie Macâ€™s credit rules and are less than the
conforming loan limit. Fannie Mae and Freddie Mac are overseen by the Federal
Housing Finance Agency (FHFA).
ï‚· The Federal Housing Administration (FHA). The FHA, a part of the
Department of Housing and Urban Development, insures mortgages that meet its
standards, including a maximum mortgage amount. If a homeowner defaults,
FHA pays the lender the remaining amount owed on the mortgage.
ï‚· The Department of Veterans Affairs (VA). The VA guarantees mortgages made
to eligible veterans who meet its standards. If a covered veteran defaults, the VA
will pay the lender. Unlike the first two programs, the VA coverage is not 100%
of the unpaid balance.
ï‚· The Department of Agricultureâ€™s (USDAâ€™s) Rural Housing Service (RHS).
RHS provides direct loans and loan guarantees for certain home mortgages in
rural areas. These programs have income limits and limits on the value of the
homes purchased that serve to limit the size of the mortgages that are made or
guaranteed.
Mortgage guarantee programs transfer risk to the government from the private sector, but may
also expand mortgage credit availability and lower interest rates for borrowers. Loan limits for
mortgages that are eligible for the programs attempt to achieve a balance by limiting the size of
the mortgages that are guaranteed or insured, in part to limit the amount of risk that is transferred
from the lender to the federal government and also to tailor the programs to the borrowers to
whom the government would like to provide assistance. The size of the loan limits may affect
which homes, and by extension which prospective homebuyers, can qualify for these types of
mortgages. To the extent that these types of mortgages represent the most affordable or only
available mortgage option for some prospective homebuyers, any increase or decrease in the loan
limits can affect access to mortgage credit for a subset of potential homebuyers.
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The Loan Limits for Government-Backed Mortgages

Introduction
The federal government supports homeownership in a variety of ways. This support is generally
based on the belief that there are benefits to society, as well as individuals, of having a high
homeownership rate. However, there is much debate about the extent to which homeownership is
the cause of such benefits as well as the extent to which the government should support
homeownership, given that potential benefits of homeownership also come with certain risks.1
One way in which the federal government supports homeownership is through programs that
insure, guarantee, or directly provide mortgages to certain eligible homebuyers.2 These programs
reduce or eliminate a lenderâ€™s loss when a homeowner does not make the scheduled mortgage
payments and may make lenders more likely to offer mortgages to certain borrowers that would
otherwise not be well-served by the private market. Another way that the government supports
homeownership is through entities that purchase mortgages made by private lenders, increasing
the amount of capital available for mortgage lending by bringing more investors into the
mortgage market.
This report analyzes the following four categories of programs that provide guarantees to lenders
or investors on certain types of mortgages, and discusses the maximum mortgage amounts
eligible under these programs:
ï‚· Fannie Mae and Freddie Mac, congressionally chartered government-sponsored
enterprises (GSEs), purchase mortgages from companies that originate them.
These purchases are subject to a maximum loan amount, which is higher in
certain areas of the nation.
ï‚· The Federal Housing Administration (FHA), part of the Department of Housing
and Urban Development (HUD), insures mortgages subject to a maximum loan
amount. The maximum amount varies across the nation based on housing prices.
The FHA fully guarantees the qualifying mortgages.
ï‚· The Department of Veterans Affairs (VA) guarantees mortgages taken out by
veterans. There are maximum guaranty limits depending on the amount of the
loan and prior VA loan status, but not a maximum mortgage amount.
ï‚· The Department of Agricultureâ€™s (USDAâ€™s) Rural Housing Service (RHS) has
two mortgage programs. One guarantees mortgages, and the other makes direct
mortgages in rural areas. These programs have income limits and limits on the
value of the homes purchased.
Fannie Mae, Freddie Mac, and FHA all have statutory limits on the dollar value of mortgages
they can purchase or insure. VA and USDA do not have statutory limits on the dollar value of
mortgages they can back, but they do have limits on the amount of the guaranty or limits on
borrower income, respectively, that serve to limit the size of the mortgages made through these
programs.

1 For more on the rationale for subsidizing homeownership, see CRS Report R46429, An Economic Analysis of the
Mortgage Interest Deduction.
2 For more on the general housing finance system, see CRS Report R42995, An Overview of the Housing Finance
System in the United States.
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Although there is some overlap, the four federal mortgage guarantee programs discussed in this
report generally have different missions or target different populations. These differences are
discussed in the â€œPossible Policy Considerationsâ€ section.
The following sections summarize the limit on the dollar amount of a mortgage that is eligible for
each of these programs. In addition to these size limits, the programs have other restrictions (such
as minimum down payments) and eligibility criteria, but these are not addressed in this report.
Loan Limits for Mortgage Programs
Conforming Loan Limits for Fannie Mae and Freddie Mac
Fannie Maeâ€™s and Freddie Macâ€™s charters limit the maximum size of a mortgage that they can
purchase.3 This limit is known as the conforming loan limit and is adjusted annually based on the
Federal Housing Finance Agencyâ€™s (FHFAâ€™s) house price index (HPI), which, in turn, is based on
a survey of average home price changes.4 (The FHFA is the regulator of Fannie Mae and Freddie
Mac.) There are three limits for Fannie Mae and Freddie Mac purchases: a baseline limit; a high-
cost limit; and a statutory limit set for properties in Alaska, Hawaii, Guam, and the U.S. Virgin
Islands. The baseline limit is increased annually by the average increase in the HPI. High-cost
area limits are recalculated at the same time. FHFA publishes conforming loan limits late in the
year before they apply (e.g., conforming loan limits for calendar year 2022 were published in
November 2021).5
There is a baseline limit for one-unit structures on the mainland United States and Puerto Rico.
For 2022, the baseline limit was set at $647,200. High-cost areas6 have higher limits, capped at
150% of the baseline limit: $970,800 in 2022 (150% of $647,200).7 High-cost area limits vary
and can range from the baseline to 150% of the baseline. By law, the conforming loan limit in
Alaska, Hawaii, Guam, and the U.S. Virgin Islands is set at 50% higher than the baseline limit for
the country. In other words, the baseline for these areas is $970,800 in 2022. For each of the
baseline, high-cost and noncontiguous state and territory limits, the limits are higher for structures
with two, three, and four units.8

3 After Fannie Mae and Freddie Mac purchase mortgages from lenders, they package these mortgages into mortgage-
backed securities (MBS), and sell them to investors, and guarantee the payment of principal and interest of the MBS to
the investors. Ginnie Mae is a government agency that guarantees timely payment to investors, similar to the Fannie
Mae and Freddie Mac guarantee, on MBS backed by loans guaranteed by federal mortgage programs such as those
administered by the FHA, VA, and USDA. Fannie Maeâ€™s charter can be found at https://www.fanniemae.com/
resources/file/aboutus/pdf/fm-amended-charter.pdf. Freddie Macâ€™s charter can be found at http://www.freddiemac.com/
governance/pdf/charter.pdf. More on Ginnie Mae can be found at https://ginniemae.gov/about_us/who_we_are/Pages/
our_mission.aspx.
4 The limit was first established in the National Housing Act of 1934, and has been modified several times since then,
most recently in the Housing and Economic Recovery Act of 2008 (P.L. 110-289, Â§1124).
5 For a list of the prior conforming loan limits, see FHFA, â€œConforming Loan Limits,â€ https://www.fhfa.gov/
DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx. For information on the 2022 limits, see FHFA, â€œFHFA
Announces Conforming Loan Limits for 2022,â€ November 30, 2021, https://www.fhfa.gov/Media/PublicAffairs/Pages/
FHFA-Announces-Conforming-Loan-Limits-for-2022.aspx.
6 High-cost areas are defined by FHFA as â€œareas in which 115 percent of the local median home value exceeds the
baseline maximum [conforming loan limit].â€
7 In areas where 115% of the median house price exceeds the baseline limit, the limit is the lesser of 150% of the
baseline or 115% of the area median house price.
8 The two-unit limit is 128% of the one-unit limit. The three-unit limit is 155% of the one-unit limit, and the four-unit
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Table 1 summarizes the 2022 conforming loan limits, determined by the formula set forth in the
Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289).9
Table 1. Conforming Loan Limits for 2022

One-Unit
Two-Unit
Three-Unit
Four-Unit
Mainland and Puerto Rico, baseline
$647,200
$828,700
$1,001,650
$1,244,850
Mainland and Puerto Rico, high
$970,800
$1,243,050
$1,502,475
$1,867,275
costa
Alaska, Hawaii, Guam, and the U.S.
$970,800
$1,243,050
$1,502,475
$1,867,275
Virgin Islands, baseline
Source: Federal Housing Finance Agency, Maximum Loan Limits for Mortgages Acquired in Calendar Year 2022 and
Originated After 10/1/2011 or Before 7/1/2007, https://www.fhfa.gov/DataTools/Downloads/Documents/
Conforming-Loan-Limits/Ful CountyLoanLimitList2022_HERA-BASED_FINAL_FLAT.pdf.
Note: These limits are determined by the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289)
and apply to loans acquired by Fannie Mae and Freddie Mac in 2021 that were originated by a lender either after
October 1, 2011, or before July 1, 2007. Under a series of laws enacted since the financial crisis, including the
Economic Stimulus Act of 2008 (P.L. 110-185), the American Recovery and Reinvestment Act of 2009 (P.L. 111-
5), as well as provisions found in appropriations (e.g., P.L. 111-88 and P.L. 111-242), higher conforming loan limits
have applied to Fannie Mae and Freddie Mac mortgages acquired in specific time frames. For example, loans
acquired by the GSEs that were originated between July 1, 2007, and September 30, 2011, are subject to
amounts determined in the aforementioned laws, which have been set as high as $729,750 for a one-unit
property. These criteria continue to apply in 2022 except for loans in high-cost areas, in which case the loan limit
is the higher of the HERA high-cost limit (which maxes out at $970,800) and $729,750. For more explanation of
the â€œseasoned mortgagesâ€ limits and for details on the calculation of the conforming loan limits, see Federal
Housing Finance Agency, Addendum: Calculation of 2022 Conforming Loan Limits Under HERA, at
https://www.fhfa.gov/DataTools/Downloads/Documents/Conforming-Loan-Limits/CLLAddendum_CY2022.pdf.
a. Some states and Puerto Rico do not have any high-cost areas.
Federal Housing Administration Insurance
FHA insures certain eligible mortgages made by private lenders against the possibility of
borrower default.10 If the borrower defaults on the mortgage, FHA will repay the lender the
remaining principal amount owed on the mortgage. FHA insurance may encourage lenders to
offer mortgages to borrowers who otherwise might not be well-served by the private mortgage
market, such as borrowers who have lower credit scores or are unable to make large down
payments. FHA serves many first-time homebuyers, low- and moderate-income homebuyers, and
minority homebuyers.11
To be eligible for FHA mortgage insurance, a mortgage must not exceed a specified maximum
loan amount that is set according to a formula specified by statute.12 The maximum loan amount

limit is 192% of the one-unit limit.
9 FHFA, Conforming Loan Limits: 2022 Conforming Loan Limits, http://www.fhfa.gov/DataTools/Downloads/pages/
conforming-loan-limits.aspx. For information on the house price survey, see FHFA, House Price Index,
https://www.fhfa.gov/DataTools/Downloads/pages/house-price-index.aspx.
10 For more information on the basic eligibility criteria for FHA-insured mortgages, see CRS Report RS20530, FHA-
Insured Home Loans: An Overview.
11 For data on FHA-insured mortgages and first-time homebuyers, minority homebuyers, and low- and moderate-
income homebuyers, see FHA, Annual Management Report, Fiscal Year 2021, p. 15, https://www.hud.gov/sites/dfiles/
Housing/documents/FHAFY2021ANNUALMGMNTRPT.pdf.
12 12 U.S.C. Â§1709(b) and P.L. 110-289 Â§2112.
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varies by area13 and, for one-unit homes, is set at 115% of the area median house price, subject to
a national floor and national ceiling. That is, if 115% of the median house price in a given area
results in a dollar amount that is below the floor, FHA can still insure mortgages with initial
principal balances up to the floor in that area. If 115% of the median house price results in a
dollar amount that is above the ceiling, FHA can insure only mortgages with a principal balance
not greater than the ceiling.
The floor and ceiling are calculated based on the conforming loan limit. By statute, the floorâ€”
that is, the lowest level the loan limit can be for a given areaâ€”is set at 65% of the conforming
loan limit. The ceilingâ€”the highest possible loan limitâ€”is 150% of the conforming loan limit
(the same as the high-cost area conforming loan limit for Fannie Mae and Freddie Mac).14 Like
the conforming loan limits, higher limits apply for two-, three-, and four-unit structures.15
FHA usually announces the loan limits for specific areas for each calendar year late in the
previous year, taking into account updated local house price data and any changes to the
conforming loan limit.16 The FHA loan limits for 2022 were announced in November 2021.17 For
a one-unit property, the nationwide floor is set at $420,680 for 2022 (65% of $647,200), and the
ceiling is set at $970,800 (150% of $647,200). The FHA loan limit floors and ceilings for 2022
are summarized in Table 2.
Table 2. FHA Loan Limits for 2022

One-Unit
Two-Unit
Three-Unit
Four-Unit
FHA Loan Limit
$420,680
$538,650
$551,500
$809,150
Floor
FHA Loan Limit
$970,800
$1,243,050
$1,502,475
$1,867,275
Ceilinga
Source: FHA Mortgagee Letter 2021-28.
Notes: The FHA loan limits in a given area are set at 115% of the area median house price for a one-unit
property, but can be no lower than the floor and no higher than the ceiling. (Loan limits for two- to four-unit
properties are specified multiples of the one-unit limit.) The specific loan limits that apply in a given area are
available on HUDâ€™s website at https://entp.hud.gov/idapp/html/hicostlook.cfm.
a. The loan limit ceilings are higher in Alaska, Hawaii, Guam, and the Virgin Islands.

13 The FHA loan limits are set at the county and metropolitan statistical area (MSA) level. The statute specifies that
area means a metropolitan statistical area as defined by the Office of Management and Budget and that the median
home price for the highest-priced county within a given MSA should be used to calculate the loan limit for the entire
MSA. See 12 U.S.C. Â§1709(b)(2).
14 The loan limit ceilings are higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands; see 12 U.S.C. Â§1715d and
FHA Mortgagee Letter 2021-28. While these areas have higher ceilings, the loan limits in the areas are still based on
area median home prices and will not necessarily be set at the higher amounts. For 2022, no areas in Alaska, Hawaii,
Guam, or the U.S. Virgin Islands have loan limits above the ceiling that otherwise applies in the rest of the country.
15 The loan limits for two- to four-unit properties are specified multiples of the one-unit limit, and are based on the
same percentage increases as the conforming loan limits.
16 The FHA loan limits for a specific area can be found on HUDâ€™s website at https://entp.hud.gov/idapp/html/
hicostlook.cfm. Lists of counties that have FHA loan limits above the nationwide floor in 2022 can be found at
https://www.hud.gov/program_offices/housing/sfh/lender/origination/mortgage_limits. Out of over 3,000 counties in
the United States, in 2022 about 70 counties have loan limits set at the ceiling and about 350 counties have loan limits
set between the floor and the ceiling.
17 HUD, â€œFHA Mortgagee Letter 2021-28,â€ 2022 Nationwide Forward Mortgage Limits, November 30, 2021,
https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-28mlhsg.pdf.
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The FHA floor is analogous to the baseline conforming loan limit for Fannie Mae and Freddie
Mac mentioned in the above section, in that FHA will insure mortgages up to the floor in all areas
of the country. However, the FHA floor is set at a lower level than the baseline conforming loan
limit. In general, in higher-cost areas where 115% of the area median home price exceeds the
Fannie Mae/Freddie Mac baseline conforming loan limit, the FHA loan limits will be the same as
the conforming loan limit. However, in areas where 115% of area median home prices is below
the baseline Fannie Mae/Freddie Mac conforming loan limit, the conforming loan limit will be
higher than the loan limit for FHA-insured mortgages. In many of these counties, the FHA loan
limits are set at the floor of $420,680 for calendar year 2022. Fannie Mae and Freddie Mac, in
contrast, can purchase mortgages with principal balances up to $647,200 in these areas.
Department of Veterans Affairs Loan Guaranty
The VA loan guaranty program assists eligible veterans by guaranteeing mortgages made by
private lenders. The program is available for the purchase or construction of homes as well as to
refinance existing loans.18
While there is no limit to the amount that a veteran can borrow and still receive a loan guaranty
through the VA, the VA limits the guaranty that it will provide based on the amount of the loan. In
most cases, the VA guaranty covers at least 25% of the principal balance of a loan. While the VA
guaranty does not insure 100% of the loan (as FHA loan insurance does), the guaranty covers
what would typically be required as a down payment in a conventional mortgage transaction to
avoid the requirement for private mortgage insurance.
The amount of the VA loan guaranty changed as part of the Blue Water Navy Vietnam Veterans
Act of 2019 (P.L. 116-23). The maximum guaranty for loans at or below $144,000 stayed largely
the same, ranging from 25% to 50% of the loan but with a â€œmaximum amount of guaranty
entitlementâ€ not to exceed $36,000.19 For loans that exceed $144,000, the maximum guaranty
amount will now typically be 25% of the loan amount.20 (Prior to enactment of P.L. 116-23, the
maximum guaranty amount for loans above $144,000 was the lesser of 25% of the loan amount
or 25% of the Freddie Mac conforming loan limit.) However, the guaranty amount for all loans
also depends on the status of previous VA loans a veteran might have entered into.
An exception to the guaranty amounts for all loans exists for veterans with outstanding
entitlement. Entitlement is the guaranty amount available to a veteran.21 When veterans have an
outstanding VA loan, they use all or a portion of their entitlement toward the guaranty. A veteranâ€™s
entitlement can be restored in various ways, in most cases when an existing property has been
sold and the loan has been paid in full.22 For veterans with outstanding entitlement that has not
been restored, the guaranty amount for VA loans at or below $144,000 is reduced by the amount
of previously used, unrestored entitlement. For loans above $144,000, the guaranty amount is
25% of the Freddie Mac conforming loan limit, reduced by the amount of previously used,
unrestored entitlement.

18 For more information, see CRS Report R42504, VA Housing: Guaranteed Loans, Direct Loans, and Specially
Adapted Housing Grants.
19 38 U.S.C. Â§3703(a)(1)(A)(i).
20 38 U.S.C. Â§3703(a)(1)(C).
21 38 U.S.C. Â§3702.
22 38 U.S.C. Â§3702(b)(1).
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The VA does not increase the maximum guaranty amount for properties with two, three, or four
units, so the Freddie Mac limit for one-unit properties applies to all units.23 (See Table 1.)
Department of Agriculture Rural Mortgage Programs
The USDAâ€™s Rural Housing Service (RHS) administers a variety of housing loan and grant
programs for rural residents authorized under the Housing Act of 1949 (P.L. 81-171).24 The
Section 502 single-family direct and guaranteed home loan programs are the major home
ownership programs. Unlike the other programs discussed in this report, the RHS programs have
limits on the income of eligible borrowers.
Section 502 Direct Loans
Under the Section 502 direct loan program, the USDA directly makes loans to low- and very-low-
income applicants (defined as having an income not more than 80% of the area median income)
to help them acquire safe and affordable housing in eligible rural areas.25
The maximum loan amount depends on the applicantâ€™s income and repayment ability. There are
no statutorily mandated mortgage limits, though RHS requires that the housing purchased be
â€œmodestâ€ for the location (e.g., generally no more than about 2,000 square feet26) and that the
property value not exceed an applicable area loan limit as determined by USDA.27 USDA
establishes those limits as a percentage of the FHA loan limits. Currently, the loan limits are 80%
of the applicable FHA loan limit in the area.28
Borrowers have to be creditworthy, but they are not generally required to make a down payment.
Loans are provided at fixed interest rates set by USDA, but these rates can be modified by
payment subsidies, which can significantly lower the actual rate. The amount of assistance is
determined by the adjusted family income.
Section 502 Guaranteed Loans
In addition to the Section 502 direct loan program, the Section 502 single family loan guarantee
program helps low- and moderate-income families in eligible rural areas become homeowners.
There is not a specific dollar limit on the amount of the mortgage, but borrower income cannot

23 Department of Veterans Affairs, VA Loan Circular 26-21-25, Federal Housing Finance Agency (FHFA) Announces
2022 Conforming Loan Limits, December 17, 2021, https://www.benefits.va.gov/HOMELOANS/documents/circulars/
26_21_25.pdf.
24 For more information on these programs, see CRS Report R47044, USDA Rural Housing Programs: An Overview.
25 For the income limits that apply in specific areas, see USDA, Rural Development Single Family Housing Direct
Loan Program, https://www.rd.usda.gov/files/RD-DirectLimitMap.pdf.
26 See USDA, Direct Single-Family Housing Loans and Grants â€“ Field Office Handbook, HB-1-3550, p. 5-12,
https://www.rd.usda.gov/sites/default/files/hb-1-3550.pdf.
27 See 7 C.F.R. Â§3550.63. The specific dollar amounts of the loan limits are available at https://www.rd.usda.gov/files/
RD-SFHAreaLoanLimitMap.pdf.
28 USDA issued a final rule in June 2019 that, among other things, provided that the area loan limits would be â€œbased
on a percentage(s) of the applicable local HUD section 203(b) limit. The percentage(s) will be determined by the
Agency and published in the program handbook.â€ Previously, the area limits were based on the cost to construct a
modest home in the county. The final rule discusses the rationale for the change. See USDA, â€œSingle Family Housing
Direct and Guaranteed Loan Programs,â€ 84 Federal Register 29035, June 21, 2019. The current percentage is specified
in Chapter 5, Section 2, page 5-11 of Handbook HB-1-3550, Direct Single-Family Housing Loans and Grantsâ€”Field
Office Handbook at https://www.rd.usda.gov/files/hb-1-3550.pdf.
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exceed 115% of the national median income, and maximum loan amounts are based on what a
borrower can afford.29 Loans are made through USDA-approved lenders, and USDA provides a
90% loan guarantee. The housing must be â€œadequate, modest, decent, safe, and sanitaryâ€ and
must be used as the ownerâ€™s primary residence.30 Eligible applicants can build, rehabilitate,
improve, or relocate a dwelling in an eligible rural area.
Possible Policy Considerations
Loan limits on government-backed mortgages arise from a number of policy considerations, some
of which are discussed below. Because each program and entity described in this report has a
somewhat different mission and different target population, these policy considerations may be
weighed differently for different programs.
Purposes of the Programs
All the mortgage programs discussed in this report have the goal of making mortgages and
homeownership more affordable and more available, but their support is targeted differently. For
example, Fannie Mae and Freddie Mac are intended to increase liquidity in the mortgage market
broadly by making it easier for lenders to sell mortgages to investors. FHA insurance encourages
lenders to offer mortgages to borrowers who might otherwise be underserved by private lenders
due to factors such as smaller down payments or less robust credit histories. The USDA programs
are designed to facilitate the financing of rural housing, addressing challenges that are specific to
rural areas (which tend to have lower house prices) and focusing on lower-income households
specifically. The VA mortgage guaranty program was created as part of the package of benefits
offered to those who served in the armed services during World War II.31 The VA program has
been expanded to cover those who have served more recently and meet additional criteria.
Differences in target populations and purposes can contribute to differences in loan limits. For
example, programs specifically targeted to low-income borrowers or to those who might
otherwise have difficulty obtaining an affordable mortgage due to down payment or credit
limitations might have lower loan limits than programs that are intended to facilitate access to
mortgage credit more broadly.
Geographic Differences
Some argue that a case can be made for the federal government providing assistance in
purchasing basic shelter or modest homes but that the case is much weaker (or nonexistent) for
aiding the purchase of upscale housing. Given that average house prices vary widely across the
country, the loan limits for these programs generally vary geographically as well. Nationwide
loan limits could lead to households living in high-cost areas being unable to use the programs to
buy homes at prices typical for the area and could at the same time lead to households in lower-
cost areas being able to use the programs to purchase homes that are higher priced for that area.
For these reasons, the loan limits vary by area and are based on â€œaverageâ€ home prices. However,
the areas used to set loan limits can be quite largeâ€”generally counties or metropolitan statistical

29 For the income limits that apply in specific areas, see USDA, Rural Development Single Family Housing Guaranteed
Loan Program, Guaranteed Housing Program Income Limits, at https://www.rd.usda.gov/files/RD-GRHLimitMap.pdf.
30 USDA, Rural Development Single Family Housing Guaranteed Loan Program, at https://www.rd.usda.gov/
programs-services/single-family-housing-guaranteed-loan-program.
31 Officially, the Servicemenâ€™s Readjustment Act of 1944, P.L. 84-881.
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areasâ€”and can include neighborhoods with a wide variety of home prices. Therefore, even
within a given area, differences in house prices across neighborhoods can affect who benefits
from these programs and can lead to loan limits that are higher or lower than typical home prices
in subareas within the larger area.
Costs and Risks
The potential costs of federal mortgage guarantee programs are an important consideration for
many policymakers. Government mortgage programs control costs by limiting eligibility, limiting
and pricing for risks,32 and ensuring that the programs operate in an efficient and safe manner.
Loan limits are one of many factors that can affect a programâ€™s risk. Higher loan limits may have
the effect of increasing financial risk to the federal government, both because they can lead to the
government insuring or guaranteeing larger individual mortgages and because they may increase
the overall number of mortgages backed by the federal government, as more borrowers may
qualify for and seek out these types of mortgages. However, the extent to which overall risk to the
government is actually increased will also depend on a variety of additional factors, including the
credit quality of the mortgages insured, interest rates, unemployment, and other macroeconomic
conditions.
Governmentâ€™s Role in the Mortgage Market
The share of mortgages insured by government agencies or guaranteed by Fannie Mae or Freddie
Mac varies based on market conditions and other factors. In recent years, the share of the dollar
volume of new mortgages backed by one of these entities has fluctuated from year to year but has
generally exceeded 60%.33 Some policymakers and others argue that the federal government
plays too large of a role in the mortgage market and propose steps to reduce or more narrowly
target the federal governmentâ€™s role while increasing the role of private capital.34 Reducing the
loan limits for some or all federal mortgage programs could be one way to reduce the
governmentâ€™s role in the mortgage market, as lower loan limits will limit the number of potential
borrowers who will use these loans. Lower loan limits may reduce the size of some federal
mortgage programs and could potentially reduce the financial risks facing the government but
may also limit credit availability for some borrowers.

32 Most of the programs discussed in this report charge mortgage insurance premiums or guarantee fees that are
intended to help cover the costs of mortgage defaults.
33 Urban Institute, â€œHousing Finance at a Glance: A Monthly Chartbook,â€ February 2022, p. 8, https://www.urban.org/
sites/default/files/publication/105511/housing-finance-at-a-glance-a-monthly-chartbook-february-2022_1.pdf.
34 For example, see U.S. Department of the Treasury, Housing Reform Plan Pursuant to the Presidential Memorandum
Issued March 27, 2019, September 2019, https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-
Reform-Plan.pdf; and HUD, Housing Finance Reform Plan Pursuant to the Presidential Memorandum Issued March
27, 2019, September 2019, https://www.hud.gov/sites/dfiles/Main/documents/Housing-Finance-Reform-Plan0919.pdf.
See also hearings held by the committees of jurisdiction on these plans: Senate Committee on Banking, Housing, and
Urban Affairs, â€œHousing Finance Reform: Next Steps,â€ September 10, 2019, https://www.banking.senate.gov/hearings/
housing-finance-reform-next-steps; House Committee on Financial Services, â€œThe End of Affordable Housing? A
Review of the Trump Administrationâ€™s Plans to Change Housing Finance in America,â€ October 22, 2019,
https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404485. Additionally, the Urban Institute has
compiled analysis and commentary among academics and policymakers and other thought leaders on housing finance
reform, which covers a range of views on the role of government in housing finance markets. For more, see Urban
Institute, â€œHousing Finance Reform Incubator,â€ https://www.urban.org/policy-centers/housing-finance-policy-center/
projects/housing-finance-reform-incubator.
Congressional Research Service

8

The Loan Limits for Government-Backed Mortgages

Author Information

Katie Jones
Andrew P. Scott
Analyst in Housing Policy
Analyst in Financial Economics

Libby Perl

Specialist in Housing Policy

Key Policy Staff
Area of Expertise
Name
Conforming Mortgages
Andrew Scott, Darryl Getter
FHA-Insured Mortgages, USDA Rural Mortgages
Katie Jones
VA-Guaranty Mortgages
Libby Perl

Disclaimer
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Congressional Research Service
R44826 Â· VERSION 6 Â· UPDATED
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