New Conventional Loan Limits for 2022

Conventional Loan Limits are Increasing to $647,200 in 2022

Within the past year, we have seen the demand for homes increase and inventory decrease, resulting in the cost of homes spiking tremendously. These increased prices have left Fannie Mae and Freddie Mac no other option than to raise the conventional loan limits exponentially for 2022. 

Announced on November 30, 2021 by the Federal Housing Finance Agency (FHFA), a borrower can now qualify for a conventional loan of up to $647,200 in most states. This is an increase of $98,950 from last year’s limit. And in higher-cost areas, the loan limit will be $970,800, or 150% of the baseline loan limit.  

This would allow a borrower to purchase a house priced at up to $680K with only 5% down and still get a loan backed by Fannie Mae or Freddie Mac. Or if someone was looking to purchase a million-dollar home, as long as they have enough down payment to borrow under the loan limit, then they can qualify for the cheap rate and costs that a conventional loan provides. 

This is a big jump, the largest percentage and dollar increase since 1980, to be exact. But it will make conventional loans available for a lot of the higher-cost cities, such as San Francisco, New York City, and Los Angeles. Many of these higher-cost cities never had the opportunity to take advantage of conforming loans before. 

The increase in loan limits will make the loans cheaper for lenders, which results in lower down payments and lower credit scores. It also allows for a higher debt-to-income ratio and parents as cosigners, along with many other benefits. And for those who are self-employed, they will now have more leniency when it comes to income requirements. 

With all that said, despite the surge in housing prices, most borrowers across the country should be able to avoid a jumbo loan. Overall, this change should make it easier to qualify for a home loan, and lead to better loan pricing.

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