2022 Loan limits approach $ 1 million


2022 Loan limits expected to be around $ 1 million

Each year, the Federal Housing Finance Agency (FHFA) increases the loan limits for compliant mortgages. The next announcement is expected before November 30.

It is very likely that the 2022 loan limits will increase to nearly a million dollars in areas where house prices are high. And even in places where house prices are lower, we would expect these limits to climb to around $ 650,000.

Higher loan limits are great news for buyers and homeowners. This move should help keep homeownership affordable, even in places where home values ​​have skyrocketed in recent years.

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How far will the compliant loan limits go?

Compliant loan limits vary by location. They are higher in expensive subways and a little lower in more moderately priced areas.

For 2022, the compliant loan limits for a single family Home should be :

  • $ 650,000 in most areas
  • A little less than a million dollars in high-priced areas like NYC and Los Angeles

Loan limits will be even higher for multi-family homes with two to four units. So if you are planning to buy a multi-unit home or investment property, you will also have more options in 2022.

So why are Fannie Mae and Freddie Mac’s loan limits increasing so sharply? Is it because the federal government had a sudden surge of generosity?

Not enough. The agency regulator, the FHFA, has a Statutory obligation under the Housing and Economic Recovery Act 2008 (HERA) to change these limits each year to keep pace with rising home prices nationwide.

And house prices have skyrocketed in 2020 and 2021.

Indeed, at the time of this writing, the last National Case-Shiller Home Price Index said home prices rose 19.8% year-on-year. And it was a record.

Thus, the huge increase in loan limits is a direct result of the high inflation in house prices.

What the new loan limits mean for homebuyers

Compliant loan limits for 2021 are $ 548,250 in most areas and $ 822,375 in expensive housing markets.

Anyone who wants to borrow more than this must currently look to a jumbo mortgage, that is, any loan above these limits.

Now, jumbo mortgages are great if that is all that is available to you. But it can be difficult to qualify for one. And their mortgage rates are often higher than those on compliant mortgages guaranteed by Fannie Mae or Freddie Mac.

Benefits of Higher Compliant Loan Limits

Higher loan limits mean fewer borrowers will need to use jumbo loans in 2022. And that could open up more expensive housing markets to a wider range of buyers.

In the past, jumbo loans often required a down payment of 20% or 30% of the sale price and a credit score of 740. And many lenders still have these kinds of requirements, usually offering competitive rates to these attractive borrowers. .

It may be possible to get jumbo financing these days with just 5% or 10% down payment and a credit score as low as 680. However, you will likely have to pay a much higher mortgage rate than someone with high credit and 20% down payment. .

This is where the new compliant loan limits can help.

You could soon qualify for that higher priced home using a conforming loan. And these are available with just a 3% down payment, a credit score of 620, and often an attractive mortgage rate. (However, keep in mind that you may have to pay for mortgage insurance for a while.)

Check your home buying budget. Start here (November 22, 2021)

What about the FHA limits?

The FHA loan limits are changed on the same basis as those of Fannie and Freddie. They should therefore increase in 2022 in the same proportion.

However, they are calculated slightly differently. Thus, the standard FHA loan limit in low cost areas is lower than that of compliant mortgages.

In some places, the loan limit for FHA loans in 2021 was as low as $ 356,362. But the cap in areas with very high average home prices was the same as that for compliant mortgages: $ 822,375.

If the limits for FHA loans increase in the same proportion as those for conventional loans – as expected – we could see FHA 2022 loans for one. single family Home as high as:

  • $ 422,000 in most areas
  • A little less than a million dollars in high-priced areas like NYC and Los Angeles

As with compliant loans, the FHA loan limits will be higher for properties with 2, 3 and 4 units.

You can find out the existing compliant and FHA loan limits in your area using this research tool.

What About VA Loan Limits?

VA loan limits were abolished in 2020. Thus, people eligible for VA loans (including most veterans, military personnel, and their surviving spouses) can borrow as much as they can afford.

But expect lenders to check this accessibility with a microscope. For very large sums, you will have to prove that you are a solvent borrower with a lot of income and financial resources.

Official 2022 loan limits will be announced this month

Please keep in mind that none of the new information above has been officially confirmed yet. And we will have to wait for an announcement, expected before November 30, for the precise figures.

After being announced, the new loan limits will take effect on January 1, 2022.

But it is highly likely that the FHFA’s announcement confirms that hikes are coming. And that the actual figures will be close to those we have quoted.

After all, the regulator uses the “HERA formula” to calculate the increases. And it is provided for by law.

Your next steps

What does all this mean for a borrower who wants to buy a home in the relevant price range? Well, it will depend on your personal situation and your goals.

If you’ve already found your dream home, you probably shouldn’t bother with your purchase at this point. After all, the seller is unlikely to wait until you arrange a 2022 mortgage. And you risk losing the property.

Of course, if you find that you can get a better deal with a conforming loan than the jumbo loan you planned, you can always refinance later, as long as mortgage rates don’t rise too high in the meantime.

But suppose you haven’t found your dream home yet. You then need to model your options using a mortgage calculator and ask yourself a few questions:

  1. How much could you save while waiting for a compliant or FHA loan rather than a jumbo loan?
  2. Do you have to move urgently? Not everyone has the luxury of waiting a few more months
  3. How fast are house prices rising where you want to buy? If very quickly, it could eat away at your potential savings

Depending on your answers to these, you may or may not benefit from waiting for a conventional or FHA loan in 2022.

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