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Updated: December 12, 2024
A high-cost area is a city, county, or parish where the median home value significantly exceeds the national average, leading to higher loan limits for mortgages.
In the context of mortgages, high-cost areas are geographic regions where home values are significantly higher than the national average. The concept was legally established under the Housing and Economic Recovery Act (HERA) of 2008, and gives home buyers in those areas access to higher mortgage loan limits. Conventional mortgages and FHA mortgages use different loan limits.
For example, the current conforming mortgage loan limit is $806,500 for a one-unit home. In high-cost areas, the conforming loan limit ranges up to $1,209,750.
The formula for identifying which areas are high-cost is straightforward. If a region’s median home value exceeds 115% of the baseline mortgage loan limit, that area is designated as a high-cost area, and its local loan limits are adjusted upwards proportionally.
Without this adjustment, many first-time home buyers would have to use jumbo mortgages to buy their homes, often with stringent underwriting criteria and higher mortgage rates. Designating an area as high-cost makes homeownership more affordable and accessible to all.
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Imagine a scenario where a first-time home buyer is eager to purchase a home in a well-known, high-cost area like San Francisco. They come across a home that, while relatively modestly priced for the Bay Area, still has a sale price significantly higher than what one would typically find in other parts of the country.
In most cities, the cost of the home would necessitate a jumbo loan, which often asks for large down payments and stricter credit qualifications. However, because the buyer is purchasing in a high-cost area, their starting loan size will fall within the special, increased mortgage loan limits specially designated for high-cost areas like this one.
Furthermore, because the mortgage remains within conforming mortgage loan limits, the buyer opts to use Fannie Mae’s HomeReady mortgage, which allows for a 3 percent downpayment with reduced mortgage insurance costs, making the prospect of owning a home in an expensive market like San Francisco a realistic and achievable goal.
The Federal Housing Finance Agency evaluates median home prices in every U.S. county each year, assigning the high-cost designation to qualified counties and metropolitan statistical areas.
The following counties were added to the high-cost area list for 2025:
No counties were removed from the high-cost area list for 2025, but the following counties were removed from high-cost list in 2024 and remain on the standard conforming loan limit list for 2025.
Here is a complete list of counties assigned a high-cost conforming mortgage loan limit for 2025:
An area is considered high-cost if its median home values exceed 115% of the baseline conforming loan limit set by the FHFA. This designation is based on local housing market data and varies across regions.
High-cost area loan limits are higher than those in standard areas. While the exact limits vary, they can reach 150% of the national conforming loan limit to accommodate higher property values in these regions.
The mortgage interest rates in high-cost areas are comparable to those in standard areas for conforming loans. However, avoiding a jumbo loan, which may have higher rates, can be a financial benefit.
Yes, programs like Fannie Mae’s HomeReady mortgage and Freddie Mac’s Home Possible mortgages cater to first-time home buyers in high-cost areas, offering low down payment options and favorable loan term, making homeownership more accessible.
To find your local mortgage loan limit, use this interactive mortgage loan limit tool.
This article, "What is a High-Cost Area?," authored by Dan Green, is based on extensive professional mortgage experience and includes references to trusted sources such as industry-leading financial institutions and expert research from the following websites:
This article was last updated on December 12, 2024.
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