Conforming Home Loan Limits for 2022: Why They’re Higher than 2021 and What It Means for You

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Posted on November 4, 2021

Purchasing a new home has just become easier and more attractive for prospective home buyers. Riding on the back of rising property values, the new conforming loan limits are in and much higher than expected.

2022 conforming loan limits

You may not have to wait to take advantage of them.

Here’s why:

Many mortgage lenders have implemented the increase early. With this nugget of good news, homeowners can obtain better mortgage rates without taking out jumbo loans.

Conforming Loan Limits Increased for 2022

Every year, the Federal Housing Finance Agency (FHFA) adjusts the baseline conforming loan limit to stay on track with fluctuating housing prices. 

According to the FHFA, the U.S. House Price Index rose 19.2% from July 2020 to July 2021 — leading them to increase the maximum conforming loan limits.

The conforming loan limits have increased much higher than expected. The new conforming loan limit for 2022 has risen to $625,000 for single-family properties in most areas.

That’s a whopping increase of $76,750 from the $548,250 loan limits for 2021. 

Of course, high cost areas like Alaska and Hawaii have an even larger limit of $937,507.

The cap went up for multi-unit properties, too:

  • Two unit properties: $800,250
  • Three-unit properties: $967,290
  • Four-unit properties: $1,202,130

Want to know how much house you can buy with a conforming loan in your area?

The FHFA has a conforming loan limits map. You can also contact a local lender or real estate agent to discuss your options.

Best Home Loan Rates Callout - Good News Lending

What Is a Conforming Loan?

A conforming loan is a mortgage that meets two criteria:

  • The dollar limits set by the FHFA, and
  • The funding criteria of Freddie Mac and Fannie Mae.

What’s the big deal with conforming loans?

Well, they’re advantageous for borrowers because they typically offer lower interest rates compared to other types of mortgages. 

And that makes purchasing a new home more affordable, even for first-time home buyers.

How Conforming Loan Limits Work in 2022

The term “conforming” describes the mortgage amount, and the median home value determines conforming limits.

It also refers to the funding criteria of Fannie Mae and Freddie Mac — government-sponsored entities that help control the mortgage market.

So, what’s the point of conforming limits?

The goal is to ensure and promote home-ownership for lower- and middle-income Americans.

When calculating the conforming loan limit, the FHFA conducts a survey where lenders report how many loans were approved. Also, lenders report monthly interest rates, loan terms, and house prices depending on the property type and location.

Each county has its own conforming loan limit. The different amounts allow high property value areas to have a loan limit in line with average house prices in that area. 

For example, while most areas in the U.S. have a limit of $625,000, the cap is set at $937,507 in Washington, D.C., where the median home value is higher.

This 3-Digit Number Can Save You Thousands! 

The average credit score for new, approved home mortgages is 732 according to the FHFA while borrowers with a 600 credit score or less make up just 6.5% of approved home loans.

What's your credit score?  Give the Good News Lending team a call at 901-651-9935 to discuss your options.

What is the Median Home Value?

The median home value is the average price of house costs in a given region. Many factors influence a median home value — location, house size, and proximity to amenities like transport and schools. 

Each state has a different median home price. 

States with high median values typically have higher median household incomes. So, borrowers in those areas can generally afford the larger mortgage payments that accompany larger conforming loan limits.

2022 conforming loan limits

Are Current Conforming Loan Limits Enough to Buy a House?

Buying a home is one of the biggest investments you’ll make. You’ll consider many factors before committing to a home loan.

But here’s the good news:

The increase in the conforming loan limit will make homeownership more accessible.

Yet, you still need to meet lender requirements before heading off to buy a home. It varies by lender, but qualifying for a conforming loan generally requires:

  • A credit score minimum of 640
  • A debt-to-income ratio of 45% or less
  • A down payment of at least 3%

You Shouldn't Have To Choose

Too many borrowers think they must choose between the convenience of an online lender and the hands-on service you might get from the "small guys." 

But We Believe You Can Have It All!

Can You Borrow More than the Conforming Loan Limit?

What if the house you want to buy is priced higher than the conforming loan limit?

It’s still possible to get a mortgage.

But instead of a conforming loan, you’ll need to take out a jumbo loan

A jumbo loan is a kind of mortgage that has higher maximums than conforming loans.

Jumbo loans usually require a minimum down payment between 10% and 15% of the home’s purchase price, with some lenders asking 20%. 

They cannot be guaranteed by either Fannie Mae or Freddie Mac, and buyers typically undergo rigorous credit checks. 

Did You Know?

Mortgage rates have hit all-time lows in recent months.  Some people have been able to take advantage of the opportunity and secure a historically low rate. Since rates change all the time, give us a call at 901-651-9935 for an up-to-date rate quote.

How Much Can You Borrow for a Home?

Most lenders suggest that you spend no more than 30% of your annual income on housing — that includes utility costs like heat, water, and electricity.

The conforming loan limit increase to $625,000 means buyers won’t have to resort to jumbo loans.

Instead, you can qualify for a conforming loan and pay lower rates.

Are you ready to purchase your dream home? Contact us, and we’ll match you with the perfect mortgage!

About the Author

Ever since I was a child, I loved playing Monopoly and learned that borrowing money from the bank was actually a good thing.  "Your indebtedness today is your net worth tomorrow," my father would say!

I’ve been in the mortgage business since 2001 and we’ve helped countless families get the home of their dreams.

I believe the loan process should be the easiest part of buying a home. After all, your closing day should be a celebration, not a day of stress!

Wendy Thompson

Wendy Thompson - President of Good News Lending

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