If you have bought or sold a home in the past two years; if you payed any attention to the local and national real estate markets, you know that home prices are rising. To help people purchase safe, comfortable, quality housing while enjoying the benefits of a conforming loan, the Federal Housing Finance Agency has increased conforming loan limits. This means numerous government-supported financing options will have larger limits in 2022.
Conforming Loan Limits Rising for 2022
There is no single number that applies to all conforming loan limits. The amount available (if you qualify) depends on where you live and what type of home you want to purchase. For most buyers, however, the main concern is the “base limit” for single-family homes. This is the lowest maximum amount allowed for conforming loans, and it applies to all areas of the country except locations that have a higher price. In many areas, the entire state is covered by the base limits.
For 2022, the base limit for a conforming loan has increased from $548,250 to $647,200. This means that no matter where you live, conforming loans are available for at least $647,200.*
Increases in conforming loans are nothing new. Every year, sometimes multiple times a year, conforming loan limits are increased to reflect the real estate market, which generally trends upwards.
But this is a significant increase.
In a single year, the baseline conforming loan limits increased by nearly $100,000. ($98,950 to be exact.) In the past, increases were usually about $50,000 to $80,000, give or take depending on the market. An increase of nearly $100,000, however, is noteworthy.
* This amount, however, depends on qualification; just because the limit is over $640,000 does not mean you will qualify for that much. Some buyers may only qualify for $400,000 or $500,000 based on their personal factors such as income, debt load, and credit.
2022 Loan Limits for Multiunit Properties Rising As Well
Properties with up to four units are also eligible for conforming loans. These loans allow borrowers to purchase housing where they can live while also generating an income from the other units.
Previously, the baseline limit for a two-unit property was $702,000. Now that has increased to $828,700. For a three-unit property, the previous limit was $848,500; this has been pushed to $1,001,650. For a four-unit property, the limit used to be $1,054,500; it now sits at $1,244,850.
Limits in San Diego and Other High-Cost Areas
In high-cost areas, locations where the cost of housing is significantly higher than most other areas, the limits for a conforming loan are even higher. To help people still afford excellent houses with a conforming loan, the FHFA sets limits to reflect the county’s housing market.
In San Diego, for example, the limit is higher than in the rest of the country. Previously, the limit for a single-family home in San Diego County was $753,250. That limit has now been increased to $879,750. This means that if you are purchasing a single-family home in San Diego County, and you qualify for the amount, you can enjoy the benefits of a conforming loan while borrowing up to $879,750.
What Loans Have These Limits?
A “conforming loan” is not a specific type of loan product. Rather, it refers to any mortgage loan that is within the limits set by the FHFA. Many loan products actually fall under the classification of a conforming loan.
FHA Loan
An FHA loan is guaranteed by the Federal Housing Administration. This organization works to support homeownership and other housing benchmarks among the general public. One of their efforts is guaranteeing loans that fit their guidelines, reducing risk to lenders and making home loans more available to borrowers.
VA Loan
A VA loan is one of the benefits offered by the Department of Veterans Affairs. Like the FHA, they do not write loans, but instead guarantee loans against default. Only eligible veterans can qualify for a VA loan, and this is one of the few mortgage options that offers zero-down financing.
Conforming Conventional Loan
A conforming conventional loan fits the guidelines set by Fannie Mae and Freddie Mac, two of the most important organizations in the real estate industry. Essentially, they purchase certain loans, which fit their guidelines, taking them off the lender’s hands. They assume the profit, but also assume the risk. Therefore, these two government-supported organizations require loans that they purchase to meet certain standards.
USDA Loan
To support home buying in rural and suburban areas, the USDA supports home loans in these areas. They also offer zero-down financing, but the home has to be located in an eligible location.
All of the loans we discussed above, and others, fall under the umbrella of “conforming loans”. Therefore, the recent increases apply to all of these loan products.
Why The Increase?
These increases are a reflection of the overall housing market. Across the country, there have been rapid increases in overall home prices, which means the conforming loans of the past (base line of roughly $548,00) is just not enough for many houses.
The nation as a whole has seen massive increases. According to Redfin, in November of 2021 the median home price was up 15%. This increase has made many homes unattainable with the previous conforming loan limits, hence the rise in limits.
Real estate, however, is a regional industry; what happens in one area may be completely different from another. In certain areas, the increases can be even higher. In San Diego, for example, Redfin says that the home-price increase has been 16.1% over the past year.
With these increases in home prices, buyers need larger loans. The FHFA has responded to meet this reality.
Put the 2022 Loan Limits to Work for You
If you are in the market for a home in San Diego, California, or any of the numerous areas we serve, contact us today. We’ll help you find a mortgage that fits the 2022 loan limits or assist in your jumbo-loan purchase. Whatever your needs, we are here to help!
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