You’ve been saving up for years, and now it’s time to finally get your dream home! But when you ask your lender, you find out the property value is too high for a traditional loan. That means that even though you have enough money saved up, your options are extremely limited. It seems like you’re so close, and now you’ve hit another roadblock! Don’t worry – we can help!
The Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), and Veterans Administration (VA) have all announced new conforming loan limits for 2022. What does that mean for you? It means that even with property values on the rise, buyers can still qualify for the financing that’s best for them! We can help make sure that you don’t miss out on getting into the perfect home.
What are Loan Limits?
Before getting into the news, let us explain what loan limits are. The term “conforming” refers to a loan that meets FHFA and Fannie Mae and Freddie Mac’s established parameters, making it eligible for agency guarantees. Similarly, the FHA and VA have announced the limits for their respective loans. In other words, more lenders can offer financing even for higher-priced homes.
Why are there Loan Limits on Mortgages?
Agencies set these boundaries to protect the government-sponsored enterprises (GSEs) that back the loans. They are responsible for reimbursing investors, so acquiring too many high-value loans might jeopardize the agency’s financial stability.
How are Loan Limits Decided?
The FHFA House Price Index is an annual study that looks at the cost of buying a home in all 50 states. The FHFA may use a previous year’s value to calculate the overall price increase and set limits accordingly. There are, however, several exceptions for Hawaii, Alaska, Guam, the United States Virgin Islands, and high-cost areas.
2022 Loan Limit Changes
Because home prices rose by an average of 18.05% in 2021, the FHFA announced that conforming loan limits would be increased by that same amount starting on January 1, 2022. The FHA and VA typically follow similar changes with a few exceptions.
Baseline Loan Limit
For most counties across the country, the conforming loan limit increase is directly equal to the rise in average home price. One-unit homes will have a conforming loan limit of $647,200 and an FHA loan limit of $420,680, while the VA loan limit depends on the veteran’s entitlement status.
In higher-cost areas, however, this increase is not as simple. The FHFA used a different calculation for areas where the median home price was 115% higher than the baseline loan limit. Instead, these counties received a conforming loan limit of 150% of the baseline, which amounts to $970,800.
Alaska, Guam, Hawaii, and U.S. Virgin Islands
The conforming loan limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands must be at least 50% higher than the national baseline limit, which means that these areas also received a new limit of $970,800. The increased limit is due to their classification as “statutorily designated high-cost areas.”
Conforming Loan Limits Map
To make finding the conforming loan limits for your area easier, the FHFA created a map of the limit differences between counties with the high-cost regions highlighted. Likewise, the FHA has its own tool to find the loan limit for your area.
How this Helps You!
Higher loan limits mean more options for you to buy a higher-priced property at a lower cost than a Jumbo Loan. Conventional loans offer choices and flexibility, while FHA and VA loans offer unrivaled accessibility and rates, respectively.
While these loan limits do not go into effect until January 1, 2022, at On Q Financial, Inc., we’re accepting applications using these new loan limits as of today. If you’ve been thinking of purchasing a home but were concerned about the increasing cost of houses, now is the time to do so!
Do not hesitate to reach out to one of our mortgage consultants to determine if your dream home is eligible!
*Information is subject to change without notice. Some restrictions may apply. Approximate loan amounts for a fixed 30 yr. Conventional loan on a purchase price of $647,200 with 10% down are shown for comparison and informational purposes only. Interest rate of 4.138%, APR of 5.147%, and down payment of $64,720. Additional estimated funds due at closing $16,448. Approximate monthly payment of $2,800. Loan scenario does not include additional costs/fees associated with monthly mortgage expenses such as HOA fee. All amounts shown are estimates and will vary for each loan. Rates and fees are subject to change at any time. This is not a commitment to lend or extend credit. Loan approval is subject to applicant’s qualification for a loan program. On Q Financial, Inc.0105220685d00000KF0ph