FIrst-time homebuyers have more room for financing their new home through the Federal Housing Administration (FHA) this year. Higher FHA loan limits for 2025 increase buying power.

These federally-insured loans offer more lenient terms to qualify for a home loan, while still giving a competitive interest rate. In 2025, qualified buyers can buy a single-family home with a purchase price of up to $524,225, with as little as 3.5% down payment, in most areas of the country. The higher loan limits reflect the increase in market value over the past year.

Every year, the Federal Housing Finance Agency (FHFA) reviews the changes in housing prices over a one-year period. Then, they adjust the limits of conforming loans to align with those changes. Between November 2023 and November 2024, U.S. housing prices rose 4.2%. In response to the upward shift in the housing price index, the FHA boosted the ceiling of the loan limits by 5.2%, from $498,527 in 2024.

Certain metropolitan areas are more expensive, so the FHA has higher limits in California, Colorado, New Jersey, New York City, Washington D.C. and some counties in the Mountain West. The FHA loan limit rose to $1,209,750 in 2025, from $1,149,825 in 2024.

According to the FHA, this higher FHA loan limits for 2025 increase buying power and allows the agency to “keep pace with increases in home prices in the coming year.”

Here in the Raleigh, NC, area, where homes are more affordable, the FHA loan limit is now $524,225. New Home Inc. has a variety of single-family homes and townhomes for sale that meet the FHA home loan guidelines.

What are the benefits of an FHA home loan?

Since 1934, the FHA has been helping people become homeowners. The loan programs have less stringent requirements than conventional home loans. For those loans, people with a credit score below 720 might have to come up with a bigger down payment, and/or pay a higher interest rate than those buyers with better scores.

Buying a home by following FHA home loan guidelines can be much easier and more affordable.

Why is there a difference?

A conventional home loan is funded through a private lender, like a bank, credit union, or mortgage company. They have to weigh the risk of lending money to people who don’t meet their criteria, because they have to follow strict requirements.

The FHA is part of the government, which insures the loans. That means the lender is covered if the borrower defaults on the loan, so they carry less risk. With less risk, the qualifications are more flexible. For example, if you want to apply for a conventional loan (from a private lender), you should have a 720 credit score. There might be a little leeway there, but not much.

To meet the FHA loan requirements, you need a 580 credit score if you have a 3.5% down payment. You might also be approved with a score between 500 and 579, but you’ll need to put 10% down.

FHA home loans are available through FHA-approved lenders, and there are plenty of them! Be sure to ask each lender for an estimate of the loan costs, including closing costs. Discuss the options of fixed rate versus adjustable rate mortgages, as well as the loan term (most commonly, 15 or 30 years) and the private mortgage insurance.

About private mortgage insurance

In any scenario where you’re paying less than 20% down payment, the lender will likely require you to pay for private mortgage insurance. This policy protects the lender. If you default on your loan, the insurer pays the lender a portion of the amount due.

When you have reached the 22% equity level in your home—having paid 22% of the principal, not interest, of the original purchase price—you can terminate the PMI in a conventional home loan. That’s not the case with an FHA home loan. The PMI continues for the term of the loan. You must refinance to remove the PMI.

The PMI is usually included in your monthly mortgage payment. The actual amount of the premium is determined by your credit score, but it averages between $30 and $70 per $100,000 borrowed. If you make a higher down payment, you’re financing less, which means your monthly PMI is also lower.

How does the higher 2025 FHA loan limit help homebuyers?

Let’s say you were shopping for a home in 2024. You were pre-approved for a mortgage. You had been looking for a certain size and type of home. Then, prices went up and your choices became more limited.

With the higher FHA home loan limits for 2025, you don’t have to shop for a lesser priced home or come up with a higher down payment.

New Home Inc. has new homes below the FHA loan limit

Now that higher FHA loan limits for 2025 increase buying power, how will you use it?

New Home Inc. is a local Raleigh home builder. We take a different approach to the design and construction of homes, both single-family and townhomes. We don’t follow the same old concepts. Because our lifestyles have changed.

• More people work from home than ever before. Using the living room or kitchen counter as a pop-up office isn’t a productive workspace.
• More multi-generational households mean more thoughtfully designed living spaces.
• Home deliveries are a common occurrence. Do you worry about leaving them outside until you get home?
• With so much demand for faster and more reliable internet connections as well as smart home automation, we can’t accept the way wiring used to be done.
• If you have an electric vehicle, you’d need a way to charge it at home, right?
• After the pandemic, indoor air quality became a bigger priority.

New Home Inc. has addressed all of these issues…and more. Every home we build, regardless of size or location, includes energy efficiency, smart technology, healthy home systems, and a full complement of new features that support the way you live today.

Our communities of new homes for sale near Raleigh are located in desirable suburbs, like Angier, Clayton, Fuquay-Varina, Lillington, and Smithfield, all within a half-hour of Raleigh. Several New Home Inc. neighborhoods offer large homesites, up to 2 acres and more!

Start picturing your home by viewing the virtual tours of our floor plans. Every home design has been created with a variety of elevations. Choose the exterior detail that suits your style and makes the home uniquely yours—like Traditional, Craftsman, Farmhouse, French Country, Georgian, English Country, and Low Country, a Carolina coastal style.

Come and see what you can buy now that higher FHA loan limits for 2025 increase buying power. More space, more features, more convenience, a big yard, and in a great location! Contact New Home Inc. to begin the journey home.