Rising home prices lead to increased loan limits for 2022
Double-digit home price increases are great news for homeowners with more equity at the end of 2021. While buyers complain when prices rise, a secondary impact of the higher prices is that they do. means that the limits for compliant mortgages and FHA loans will also be higher. Borrowers can therefore avoid needing a jumbo loan to purchase a property.
Loan limits for conforming loans acquired by Fannie Mae and Freddie Mac, which are reset every year, will increase next year. The FHA loan limits, which have not yet been announced, will also likely increase due to the price hike. VA loans can be approved for any amount for qualified borrowers as loan limits have been removed for this program effective January 1, 2020.
In most housing markets, the new compliant loan limit will be $ 647,200 in 2022, an increase of $ 98,950 from the limit of $ 548,250 in 2021. Borrowers who need to finance an amount more important to buying a home will need to apply for a jumbo loan, which often has stricter guidelines for borrowers, larger down payment requirements, and sometimes higher interest rates due to the risk associated with a larger loan.
The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is required by the Housing and Economic Recovery Act to adjust loan limits based on changing house prices. The FHFA’s Home Price Index showed that house prices rose on average by 18.05% between the third quarters of 2020 and 2021, so the compliant loan limit will increase by the same percentage.
The compliant loan limit will be higher in all but four counties in the United States in 2022.
Compliant loan limits are higher in around 100 expensive housing markets, including the Seattle-Bellevue area and the Portland-Vancouver, Washington area. The FHFA considers markets as high cost areas when 115% of the median value of the local house exceeds the loan limit that conforms to the standard. In 2022, the new loan limit for properties in these high-cost markets will be $ 970,800, or 150% of the standard loan limit of $ 647,200.
The limits apply to all loans that will close in 2022.