Dream Bigger with Loan Limit Increases

December 3, 2021

As home prices continue a record-breaking climb, the Federal Housing Finance Agency (FHFA) said on Nov. 30 that loan limits for mortgages that can be bought by Fannie Mae and Freddie Mac in 2022 will rise by 18 percent—the largest year over year increase since 2016.
 FHFA states that house prices in the United States rose 18.5 percent from the third quarter of 2020 to the third quarter of 2021, the fastest appreciation on record. Idaho led the way with a 35.8 percent jump in prices, followed by a 30.3 percent spike in Utah.
 For much of the U.S., the divide between conforming (conventional) loans and jumbo mortgages will be $647,200. That’s an 18 percent increase from this year’s 2021 limit of $548,250.
 In more expensive housing markets—including much of California, all of New York City, the District of Columbia, and the entire states of Alaska and Hawaii—the new limit is $970,800, up from $822,375 in 2021. These numbers apply to single-family properties, in particular. There are higher limits for multi-family housing properties, such as duplexes and triplexes.
2022 Baseline Conventional Loan Limits
1-Unit $647,200 2-Unit $828,700 3-Unit $1,001,6504-Unit $1,244,850
Some markets fall in between, like Colorado’s Boulder County, where the new limit for conforming loans is $747,500, and in Florida’s Monroe County, where the limit is $710,700; in the Nashville metro area, it’s $694,600.
 “The existing loan limits have made it hard for people in certain parts of the country to take advantage of historically low-interest rates as prices have risen and both prospective and existing homeowners have been able to afford more.”  – Jodi Hall, president of Nationwide Mortgage Bankers in Melville, New York.
 Why does this matter? Low-interest rates, which incentivize home buying, and a national housing shortage have created the perfect storm for home values to rise over the past year. When policies are enacted that make getting loans easier or cheaper, typically consumers buy more. Demand without an increase in supply means prices go up. And the increase in loan limit levels should incentivize more homebuying despite no major influx predicted for home supply due to lingering supply chain issues related to COVID-19.
 What does this mean for FHA loans? The new FHA loan limit is up from the national baseline of $356,362 in 2021 to $420,680 for 2022 for single-unit properties. That means borrowers can buy a home worth up to $420,680 with as little as 3.5% down. Curious to see what your county’s new FHA ceiling is? Keep in mind that not all counties fall under the new 2022 loan limits—some counties in high-cost areas have a higher loan limit. For more information about your county, click hereWhat does this mean for Reverse Mortgages? The announcement from FHA regarding the reverse mortgage limit applies to the Maximum Claim Amount, which is the maximum home value that can be used when calculating the reverse mortgage principal limit. Raising the Max Claim Amount will provide access to more equity for those with home values up to $970,800, an 18% increase over the previous limit of $822,375. 

Nicole Klingerman, CMA
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