New Federal Mortgage Limits: A Game Changer for Long Island Luxury Homes!
Exciting news for aspiring homeowners in high-cost regions like Long Island! 💰 Starting next year, the federal government will back mortgages up to a staggering $1.2 million, a game-changer that local mortgage experts believe will supercharge the Island’s luxury real estate scene.
Just last week, the Federal Housing Finance Agency (FHFA) revealed a significant increase in the conforming loan limit—the maximum amount lenders can extend while still qualifying for loans purchased by secondary mortgage giants like Fannie Mae and Freddie Mac.
In high-cost areas, the new threshold for single-family homes will soar to $1,209,750. Any loans above this amount will be categorized as jumbo loans, which are not eligible for purchase by these government-backed entities, designed to enhance credit accessibility. Lenders depend on these purchases to keep their loan engines running smoothly.
“This change opens doors to greater lending flexibility and more competitive rates for homeowners,” asserts Zahra Jafri, founder and president of Lynx Mortgage Bank in Westbury. “In a high-cost area, access to credit is crucial for potential buyers to achieve their dreams of homeownership.”
Nassau and Suffolk counties are among the select 99 areas in the United States and Washington D.C. enjoying this elevated conforming loan limit, while most of the U.S. will see a cap of $806,500 next year.
Although Long Island homebuyers can now borrow up to $1.2 million with federal backing, staying within the standard limit of $806,500 could yield significant benefits, according to Andrew Russell, owner and founder of RCG Mortgage in Hauppauge. Loans above this threshold are classified as high-balance loans, often accompanied by higher rates.
Russell estimates that a borrower taking out an $800,000 mortgage could enjoy a remarkable half-point reduction in their interest rate, translating to about $250 in monthly savings!
To paint a clearer picture, consider this scenario: A buyer eyeing a $1.5 million property, putting down 20% ($300,000), could secure a conforming loan for $1.2 million. This could lead to an overall monthly payment of roughly $10,000, including taxes and insurance.
With an annual income of $250,000 and no existing debt, that buyer would theoretically qualify for the loan—but is it a wise choice?
“Earning a quarter-million a year sounds great, but once you account for taxes and everyday expenses, affording that mortgage may be unrealistic,” Russell explains. “This highlights how mortgage guidelines can sometimes feel less stringent than expected.”
Russell remains optimistic that mortgage rates will begin to decline next year, making financing even more affordable.
The average 30-year fixed mortgage rate stood at 6.81% for the week ending November 27, a slight dip after a period of consistent increases—up from about 6.1% in late September.
However, buyers qualifying for loans aren’t the only ones facing challenges. Due to intense competition and a limited supply of homes on the market, securing an accepted offer remains a struggle, according to Russell.
“Affordability is slowly improving,” he adds, “but getting that elusive accepted offer continues to be a tough hurdle.”
Rising Home Prices
Each year, the FHFA adjusts the loan limits to reflect rising home prices. For 2025, the high-cost loan limit will see a 5.2% increase, matching the rise in the national Home Price Index from last year’s third quarter.
Long Island’s home prices have surged even faster. The median price for single-family homes and condos (excluding the East End) leapt 9.4% to $700,000 in the third quarter compared to the prior year, according to a recent report from leading real estate firms.
The newly raised loan limits are particularly significant for the upper tier of Long Island’s housing market. In the third quarter alone, there were 648 sales above $1.34 million—making up the top 10% of the market.
In the luxurious Hamptons, the median price among 393 transactions was around $1.54 million, reflecting an 8.5% increase from the previous year during the same period.
Keep in mind that national and local price measures are calculated differently. The FHFA utilizes a repeat-sales index for single-family homes, comparing current sales to prior transactions for the same properties. In contrast, local real estate firms calculate median prices from all sales within a given quarter compared to the same quarter of the previous year, influenced by changes in home size and location.
