A few weeks ago, a first-time buyer came to me excited and prepared — she had found a home she loved and was eager to get pre-approved. As I began working through her file, I did something every loan officer should do: I looked up the property type in public records. Sure enough, it was a condo. She and her Realtor disagreed. They insisted it wasn’t.
They moved on and chose another lender who told them what they wanted to hear.
Fast forward to today — and guess what? It is a condo. But now the story has a new ending: Fannie Mae and Freddie Mac’s updated Area Median Income (AMI) limits went into effect, and her income now falls just under the new threshold. That change unlocked two key benefits:
- She’s now eligible for the HomeReady or Home Possible program
- And because her income qualifies, she’s exempt from loan-level price adjustments (LLPAs) — which would’ve added thousands to her cost over time
This isn’t just a happy ending — it’s a lesson in why knowing the guidelines matters, and why not all lenders are created equal, especially the big-box call centers that might not understand local nuances.
What Are AMI Limits and Why Do They Matter?
AMI, or Area Median Income, is the benchmark used by Fannie Mae and Freddie Mac to determine borrower eligibility for affordable loan programs like HomeReady and Home Possible.
These programs are designed for low- to moderate-income buyers and offer:
- 3% down payment options
- Reduced mortgage insurance
- Lower interest rates
- Waived LLPAs for qualifying borrowers
But here’s the catch: to qualify, your income must fall at or below 80% of your area’s AMI.
What Changed and When?
As of May 18, 2025, the new AMI limits are officially live in Desktop Underwriter (DU) and Loan Product Advisor (LPA) systems.
For example:
- In the Cincinnati metro, the 80% AMI cap increased from ~$90,400 in 2024 to $95,680 in 2025.
That might not sound drastic, but that 5–7% bump can push a previously ineligible buyer into eligibility — unlocking thousands of dollars in savings over the life of the loan.
AMI Trends Over the Past Decade
To put this year’s increase into perspective, we analyzed national income limits for a 4-person household at the 80% threshold going back to 2012. The results tell a powerful story.
In 2012, the average 80% AMI nationally was around $45,500. By 2025, that number has climbed to over $74,000 — an increase of more than $28,000 in just over a decade. That’s a 65% jump in affordability thresholds.
But average growth only tells part of the story. The spread between the highest and lowest cost areas has also widened, making it even more important for buyers and professionals to understand how local income caps apply.
Visualizing the Trend:
The chart below illustrates how AMI limits have shifted over the past 14 years — and how they’re expected to continue growing through 2030. It includes the Bottom 10%, National Average, and Top 10% of 80% AMI income caps for a 4-person household.
As you can see, AMI limits have risen consistently across the board. The bottom 10% of eligible incomes has gone from around $36,800 in 2012 to over $56,000 today. The top 10% has surged from $56,000 to nearly $97,500 in the same timeframe.
This rise has major implications:
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More buyers qualify for HomeReady or Home Possible programs each year
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Strategic loan structuring becomes increasingly important around income caps
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State and local eligibility thresholds may also shift, especially for DPA programs
And the dotted lines? Those show projected income caps through 2030 if current trends continue. Even a conservative projection suggests continued upward movement in eligibility — a vital insight for long-term planning.
Pro tip: If your client just missed the cut this year, check again next May. A new AMI update might be all it takes to make them eligible for better rates and waived LLPAs.
Key Distinction: Qualifying Income ≠ Household Income
One of the most misunderstood aspects of these programs is that they use qualifying income, not gross or household income.
This creates strategic opportunities:
- A couple may qualify using only one spouse’s income
- A loan officer may intentionally exclude bonus or side income if it would push the borrower over the limit
- Self-employed borrowers may benefit from how underwriting calculates usable income
Smart structuring makes a huge difference. This is where well-informed lenders shine.
Know Before You Write the Offer
Don’t guess. Fannie Mae and Freddie Mac both offer free AMI lookup tools that let you plug in a property address and instantly see the income cap.
These tools are especially important in:
- Areas where crossing a county line changes the limit
- Rural zones where income limits are surprisingly generous
Recommended tools:
Myth Buster: These Programs Are Not Just for First-Time Buyers
It’s a common myth — even among professionals — that HomeReady and Home Possible are reserved for first-time buyers.
The truth?
- You don’t have to be a first-time buyer
- You can use these programs if you’re moving up or down
- You just need to meet income and property eligibility
So yes, a buyer who sold their home a few months ago and is purchasing again could qualify for 3% down and better pricing — as long as their qualifying income is within the limit.
Final Thoughts
We say it all the time: knowledge is power, but in mortgage lending, knowledge is savings — often to the tune of thousands of dollars.
With AMI limits now at their highest levels ever recorded, many buyers are newly eligible for powerful tools like HomeReady and Home Possible. Don’t assume your lender knows the nuances. And don’t assume your buyer doesn’t qualify.
Whether you’re a buyer, Realtor, or fellow loan originator, this is a critical time to revisit your understanding of affordable loan programs — because strategy, more than ever, is what separates the good deals from the great ones.
