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Loan Limits Increase in 2022

Big news! Just last month the Federal Housing Finance Agency (FHFA) announced the conforming loan limits for mortgage loans to be acquired by Fannie Mae and Freddie Mac in 2022. With astronomical home price appreciation defining the past year, mortgage limits are steadily increasing.

What This Means for You!

We know that the mortgage world isn’t always the easiest thing to understand. However, this is one change you want to keep an eye on!

For 2022, conforming loan limits increased by a total of $98,950 from last year! This means that qualified borrowers will now be able to take out larger loans backed by the government-sponsored enterprises, Fannie Mae and Freddie Mac, the Federal Housing Administration, and Department of Veterans Affairs.

This is great news, as conforming loan limits impact how much home buyers can borrow before having to switch to a jumbo loan, which requires a higher credit score, down payment, and interest rates.

In most of the United States, single-family homebuyers will now be able to borrow up to these limits:

Conventional loan – $647,200
FHA loan – $420,680
VA loan – No loan limit for Veterans with full entitlement

Conventional Loan Limits for 2022

Conventional loans are not insured or backed by a government agency and typically come with a fixed rate and term. They are easier to obtain, and only available, for those borrowers with good credit scores and that have cash readily available for a down payment.

More than 60% of home purchase loans are conventional mortgages, making these loans the most common for homebuyers. View the chart below to get an idea of the CLL’s in your area!

Low-Cost Area Medium-Cost Area High-Cost Area
1 Unit $647,200 $647,201-$970,799 $970,800
2 Units $828,700 $828,701-$1,243,049 $1,243,050
3 Units $1,001,650 $1,001,651-$1,502,474 $1,502,475
4 Units $1,244,850 $1,244,851-$1,867,274 $1,867,275

*Note that Alaska, Hawaii, Guam, and the U.S. Virgin Islands have their own set of loan regulations and will have a baseline limit of $970,800 on one-unit properties for 2022.

FHA Loan Limits for 2022

FHA loans are mortgages issued by qualified lenders and insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. The FHA insures your loan, making the loan less risky for your lender, which allows the lender to offer you better terms.

View the chart below to get an idea of the FHA Loan Limits in your area!

Low-Cost Area Medium-Cost Area High-Cost Area
1 Unit $420,680 $420,681-$970,799 $970,800
2 Units $538,650 $538,651-$1,243,049 $1,243,050
3 Units $651,050 $651,051-$1,502,474 $1,502,475
4 Units $809,150 $809,151-$1,867,274 $1,867,275

*Note that Alaska, Hawaii, Guam, and the U.S. Virgin Islands have their own limits set higher. This is due to the cost of construction. The 2022 limits in these areas are $1,456,200 for one-units; $1,864,575 for two-units; $2,253,700 for three-units; and $2,800,900 for four-units.

VA Loan Limits

A VA loan is insured by the Department of Veterans Affairs, meaning the VA will guarantee part of the loan, enabling the lender to offer significantly better-than-average terms as a reward for the service veterans have provided to America.

The Department of Veteran Affairs removed the maximum loan amount it would grant its borrowers in 2020 following the signing of the Blue Water Navy Vietnam Veterans Act. While there is no maximum on how much you can borrow, VA loan limits help determine how much you can borrow without needing to factor in a down payment.

The standard VA loan limit in 2022 is $647,200 for most U.S. counties.

Note that VA loan limits no longer apply to qualified Veterans with their full VA Loan entitlement. Veterans with reduced VA Loan entitlement must still follow VA loan limits.

Eligible borrowers for VA loans include veterans, active-duty service members, National Guard members, reservists, and surviving spouses.

VA loans also have an upfront funding fee, which most borrowers will roll into the mortgage closing costs. Be sure to ask about this number when going through the VA Loan process!

What Are Loan Limits and Why Do They Increase?

A conforming loan limit is the dollar cap on the size of a mortgage loan that Freddie Mac and Fannie Mae are willing to buy or guarantee.

Following the mortgage crisis of 2008, The Housing and Economic Recovery Act was established to prevent such issues from arising again. According to the FHFA, The Housing and Economic Recovery Act requires conforming loan limits to be adjusted each year based on the average U.S. home price.

The FHFA’s House Price Index shot up 18.05% annually in the third quarter of 2021 so the conforming loan limit increased by the same amount.

This is a positive development for consumers, as it allows lenders like us to offer our homebuyers more flexible down payment and lending options for larger loan amounts.

Wondering about how this change will affect you? Connect with one of Southern Trust Mortgage’s skilled Loan Officers today to discuss your options!

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