The Loan Limits for Government-Backed Mortgages

April 27, 2017 – June 9, 2022 R44826

The Loan Limits for Government-Backed
Mortgages
Updated June 9, 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 support from quasi-government entities that promise lenders or investors
that if a homeowner defaults on a covered mortgage, the lender or investor will still receive
some—or all—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 limits on the size of mortgages that are eligible. This report contains brief
program descriptions and discusses the maximum mortgage amounts for each.
The government or quasi-government entities that insure, guarantee, or make mortgages and are
discussed in this report are the following:
 Fannie Mae and Freddie Mac. Lenders sell mortgages to Fannie Mae and
Freddie Mac, which are congressionally chartered government-sponsored
enterprises (GSEs). This supports liquidity in the mortgage market by allowing
lenders to exchange illiquid, long-term mortgages for cash. This also allows
lenders to offload the risks associated with mortgages. These mortgages are
called conforming loans because they conform to Fannie Mae’s and Freddie
Mac’s requirements, including having a principal balance at origination that does
not exceed the conforming loan limit. Fannie Mae and Freddie Mac then package
these mortgages into mortgage-backed securities (MBS), and sell the MBS to
investors, guaranteeing the timely payment of principal and interest of the MBS
to the investors. Fannie Mae and Freddie Mac are overseen by the Federal
Housing Finance Agency (FHFA).
 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.
 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 a portion of the remaining amount owed.
 The Department of Agriculture’s (USDA’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.
Federal support for mortgages transfers 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.
Congressional Research Service

The Loan Limits for Government-Backed Mortgages

Introduction
The federal government supports homeownership in a variety of ways. This support is generally
based on a 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 lender’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 describes the following four categories of programs that provide guarantees to lenders
or investors on certain types of mortgages, and discusses the mortgage amounts eligible under
these programs:
 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 varies by
geographic area. The GSEs package these mortgages into mortgage-backed
securities (MBS), and sell the MBS to investors, guaranteeing the timely
payment of principal and interest of the MBS to the investors.
 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.
 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.
 The Department of Agriculture’s (USDA’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 “Selected Policy Considerations” 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 Mae and Freddie Mac were chartered by Congress to support mortgage lending markets.
They do this by purchasing mortgages from lenders, packaging these mortgages into MBS,
selling the MBS to investors, and guaranteeing the timely payment of principal and interest of the
MBS to the investors. (In response to the financial crisis, in 2008 the FHFA placed both Fannie
Mae and Freddie Mac in conservatorship; in addition, Treasury has made funding commitments
to maintain the GSEs’ positive net worth.3) The statutes that govern Fannie Mae and Freddie Mac
direct them to establish limits on the original principal amount of mortgages they will purchase.4
The statutes further provide that those limits shall not exceed certain specified amounts, with
those amounts subject to annual adjustments based on the Federal Housing Finance Agency’s
House Price Index (FHFA HPI), a measure of the movement of single-family house prices in the
United States.5 Each year the FHFA, which regulates Fannie Mae and Freddie Mac, announces
the limits on the principal balance of mortgages that they can purchase in the upcoming year,
known as the conforming loan limit (CLL).6 The statutory provisions governing the limits on the
size of mortgages they can purchase have been modified several times, most recently in the
Housing and Economic Recovery Act of 2008 (HERA, P.L. 110-289, §1124).
There are two general limits for Fannie Mae and Freddie Mac purchases: a baseline limit and a
high-cost area ceiling. For 2022, the baseline limit for one-unit structures was set at $647,200.
The limit in high-cost areas7 is capped at 150% of the baseline limit: $970,800 in 2022 (150% of

3 U.S. Department of the Treasury, “Treasury Department and FHFA Amend Terms of Preferred Stock Purchase
Agreements for Fannie Mae and Freddie Mac,” January 14, 2021, at https://home.treasury.gov/news/press-releases/
sm1236. For more on the Treasury arrangements, see https://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-
Stock-Purchase-Agreements.aspx. Also see CRS Report R44525, Fannie Mae and Freddie Mac in Conservatorship:
Frequently Asked Questions.
4 Fannie Mae’s charter can be found at https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/
resources/file/aboutus/pdf/fm-amended-charter.pdf and Freddie Mac’s at http://www.freddiemac.com/governance/pdf/
charter.pdf. For the provisions governing limits on the original principal balances of mortgages they can purchase, see
12 U.S.C. §1717(b)(2) and 12 U.S.C. §1454(a)(2), respectively.
5 For more information on the FHFA HPI, see https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-
Index.aspx.
6 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). For current and past conforming loan limit amounts, see
https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limit.aspx. For more on the methodology used
to calculate the conforming loan limits, see https://www.fhfa.gov/DataTools/Downloads/Documents/Conforming-
Loan-Limits/FHFA-CLL-FAQs.pdf.
7 High-cost areas are defined by FHFA as “areas in which 115 percent of the local median home value exceeds the
baseline maximum [conforming loan limit].”
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$647,200).8 High-cost area limits vary and can range from the baseline to 150% of the baseline.
In addition, 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 limit for
these areas is $970,800 in 2022. All of these limits are higher still for structures with two, three,
and four units.9
Table 1 summarizes the 2022 conforming loan limits, determined by the formula set forth in P.L.
110-289.10
Table 1. Conforming Loan Limits for 2022

One-Unit
Two-Unit
Three-Unit
Four-Unit
Baseline
$647,200
$828,700
$1,001,650
$1,244,850
High-Cost Areasa
$970,800
$1,243,050
$1,502,475
$1,867,275
Alaska, Hawaii, Guam, and the U.S.
$970,800
$1,243,050
$1,502,475
$1,867,275
Virgin Islands
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 2022 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 laws (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 “seasoned mortgages” 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.11 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

8 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.
9 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
limit is 192% of the one-unit limit.
10 FHFA, Conforming Loan Limits: 2022 Conforming Loan Limits, http://www.fhfa.gov/DataTools/Downloads/pages/
conforming-loan-limits.aspx.
11 For more information on the basic eligibility criteria for FHA-insured mortgages, see CRS Report RS20530, FHA-
Insured Home Loans: An Overview.
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payments. FHA serves many first-time homebuyers, low- and moderate-income homebuyers, and
minority homebuyers.12
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.13 The maximum loan amount
varies by geographic area14 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 floor—
that is, the lowest level the loan limit can be for a given area—is set at 65% of the baseline
conforming loan limit. The ceiling—the highest possible loan limit—is 150% of the baseline
conforming loan limit (the same as the high-cost area ceiling for Fannie Mae and Freddie Mac).15
Like the conforming loan limits, still higher limits apply for two-, three-, and four-unit
structures.16
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.17 The FHA loan limits for 2022 were announced in November 2021.18 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.

12 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.
13 12 U.S.C. §1709(b) and P.L. 110-289 §2112.
14 The FHA loan limits are set based on the county and metro area. The statute specifies that area means a metropolitan
statistical area (MSA) 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.
§1709(b)(2).
15 The loan limit ceilings are higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands; see 12 U.S.C. §1715d and
FHA Mortgagee Letter 2021-28. While these areas have higher ceilings, the loan limits in these 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.
16 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.
17 The FHA loan limits for a specific area can be found on HUD’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.
18 HUD, “FHA Mortgagee Letter 2021-28,” 2022 Nationwide Forward Mortgage Limits, November 30, 2021,
https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-28mlhsg.pdf.
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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 HUD’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.
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 loan limit for FHA-insured
mortgages will generally be lower than the conforming loan limit. 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.19
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 due to provisions enacted 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 “maximum
amount of guaranty entitlement” not to exceed $36,000.20 For loans that exceed $144,000, the
maximum guaranty amount will now typically be 25% of the loan amount.21 (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

19 For more information, see CRS Report R42504, VA Housing: Guaranteed Loans, Direct Loans, and Specially
Adapted Housing Grants.
20 38 U.S.C. §3703(a)(1)(A)(i).
21 38 U.S.C. §3703(a)(1)(C).
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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.22 When veterans have an
outstanding VA loan, they use all or a portion of their entitlement toward the guaranty. A veteran’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.23 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.
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.24 (See Table 1.)
Department of Agriculture Rural Mortgage Programs
The USDA’s Rural Housing Service (RHS) administers a variety of housing loan and grant
programs for rural residents that are authorized under the Housing Act of 1949 (P.L. 81-171).25
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.26
The maximum loan amount depends on the applicant’s income and repayment ability. There are
no statutorily mandated mortgage limits, though USDA requires that the housing purchased be
“modest” for the location (e.g., generally no more than about 2,000 square feet27) and that the
property value not exceed an applicable area loan limit as determined by USDA.28 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.29

22 38 U.S.C. §3702.
23 38 U.S.C. §3702(b)(1).
24 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.
25 For more information on these programs, see CRS Report R47044, USDA Rural Housing Programs: An Overview.
26 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.
27 See USDA, Direct Single-Family Housing Loans and Grants – Field Office Handbook, HB-1-3550, p. 5-12,
https://www.rd.usda.gov/sites/default/files/hb-1-3550.pdf.
28 See 7 C.F.R. §3550.63. The specific dollar amounts of the loan limits are available at https://www.rd.usda.gov/files/
RD-SFHAreaLoanLimitMap.pdf.
29 USDA issued a final rule in June 2019 that, among other things, provided that the area loan limits would be “based
on a percentage(s) of the applicable local HUD section 203(b) limit. The percentage(s) will be determined by the
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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. Income-eligible borrowers can qualify for
payment subsidies that reduce monthly payments to more affordable levels; the amount of
assistance is determined by the adjusted family income.30
Section 502 Guaranteed Loans
The Section 502 single-family loan guarantee program helps low- and moderate-income31
families in eligible rural areas become homeowners. There is not a specific dollar limit on the
amount of the mortgage, but there are borrower income limits, and maximum loan amounts are
based on what a borrower can afford. Loans are made through USDA-approved lenders, and
USDA provides a 90% loan guarantee. The housing must be “adequate, modest, decent, safe, and
sanitary” and must be used as the owner’s primary residence.32 Eligible applicants can build,
rehabilitate, improve, or relocate a dwelling in an eligible rural area.
Selected 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 only having the capacity to make smaller down payments or having 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.33 The loan guaranty continues to be a benefit available to veterans
today and has been expanded to cover those who have served more recently and meet additional
criteria.

Agency and published in the program handbook.” 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, “Single Family Housing
Direct and Guaranteed Loan Programs,” 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 Grants—Field
Office Handbook at https://www.rd.usda.gov/files/hb-1-3550.pdf.
30 See 7 C.F.R. §3550.68.
31 Moderate income is defined at 7 C.F.R. §3555.10. 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.
32 USDA, Rural Development Single Family Housing Guaranteed Loan Program, at https://www.rd.usda.gov/
programs-services/single-family-housing-guaranteed-loan-program.
33 Officially, the Servicemen’s Readjustment Act of 1944, P.L. 84-881.
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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 to
individuals in support of purchasing basic shelter or modest homes, but that the case is much
weaker (or nonexistent) for aiding the purchase of more 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 geographic area and are
based on average home prices. However, the areas used to set loan limits can be quite large—
generally counties or metropolitan statistical areas—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,34 and ensuring that the programs operate in an efficient and safe manner.
Loan limits are one of many factors that can affect a program’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.
Government’s Role in the Mortgage Market
The share of mortgages supported by government agencies or 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 any one of these entities has fluctuated from year to year but has
generally exceeded 60%.35 Some policymakers and others argue that the federal government
plays too large of a role in the mortgage market and have proposed steps to reduce or more

34 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.
35 See Urban Institute, “Housing Finance at a Glance: A Monthly Chartbook,” May 2022, p. 8, https://www.urban.org/
sites/default/files/2022-06/Housing%20Finance%20at%20a%20Glance%20May%202022%20chartbook.pdf, showing
the shares of annual mortgage originations that were securitized by Fannie Mae or Freddie Mac and securitized
FHA/VA loans.
Congressional Research Service

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The Loan Limits for Government-Backed Mortgages

narrowly target the federal government’s role while increasing the role of private capital.36
Reducing the loan limits for some or all federal mortgage programs could be one way to reduce
the government’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.

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

36 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, “Housing Finance Reform: Next Steps,” September 10, 2019, https://www.banking.senate.gov/hearings/
housing-finance-reform-next-steps; House Committee on Financial Services, “The End of Affordable Housing? A
Review of the Trump Administration’s Plans to Change Housing Finance in America,” 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, “Housing Finance Reform Incubator,” https://www.urban.org/policy-centers/housing-finance-policy-center/
projects/housing-finance-reform-incubator.
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The Loan Limits for Government-Backed Mortgages

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
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copy or otherwise use copyrighted material.

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