One way in which the federal government supports homeownership is through programs that insure, guarantee, or directly provide mortgages to certain eligible homebuyers. In other cases, the programs may increase the amount of capital available for mortgage lending by bringing more investors into the mortgage market. This report analyzes the following four federal programs or entities that provide guarantees to lenders or investors on certain types of mortgages, and discusses the maximum mortgage amounts eligible under these programs: 
Fannie Mae and Freddie Mac, congressionally chartered government-sponsored enterprises (GSEs), purchase mortgages from companies that originate them. There is a maximum guaranty amount, but not a maximum mortgage or income limit. 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. These differences are discussed in the " Possible Policy Considerations " section. Conforming Loan Limits

Fannie Mae's and Freddie Mac's charters limit the maximum size of a mortgage that they can purchase. If the borrower defaults on the mortgage, FHA will repay the lender the remaining principal amount owed on the mortgage. Department of Veterans Affairs Loan Guaranty

The VA loan guaranty program assists eligible veterans by guaranteeing mortgages made by private lenders. Unlike conforming and FHA-insured mortgages, in many cases the VA program does not require the borrower to make a down payment. If the amount of a loan exceeds the maximum amount at which the VA will guarantee 25% of the loan, a veteran may have to make a down payment equal to 25% of the amount over the loan limit to qualify for the loan. U.S. 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 authorized under the Housing Act of 1949. The FHA, Fannie Mae, and Freddie Mac are intended to increase liquidity in the mortgage market more broadly by making it easier for lenders to sell mortgages to investors. The FHA and the conforming loan limits attempt to reduce risk by limiting the size of the mortgages guaranteed, thereby limiting the amount of risk transferred from the lender to the federal government. The VA limits the amount of the guaranty, but not the amount of the mortgage it will provide, which shares the risk with the lender instead of assuming all of it. (In economic terms, to the extent that the fees do not cover the government's costs, the programs are subsidized.) 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. It may reduce the financial risks facing the government but may also limit credit availability for some borrowers.
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 some—or all—of the amount it was owed. In some cases, the guarantees support homeownership by making private lenders more willing to offer certain types of mortgages. In other cases, the guarantees provided by these entities may 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 guarantee amounts that limit 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:
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 Mae's and Freddie Mac's credit rules and are less than the conforming loan limit. The Federal Housing Administration (FHA). The FHA 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. Unlike the first two programs, the VA coverage is not always 100% of the unpaid balance. The U.S. Department of Agriculture's Rural Housing Service (RHS). RHS provides direct loans and loan guarantees for certain home mortgages in rural areas. RHS does not have a maximum mortgage size, but does have limits on income and the value of the home purchased.
Mortgage guarantee programs transfer risk to the government from the private sector, but may also expand credit availability and lower 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.