Conforming Home Loan Limits 2022

What this means for you.  If you are looking for a loan great than $548,250 but less than $647,200, your loan will now be a conforming home loan, and will be less expensive than it was previously.  If you are seeking a mortgage great than $822,350 but lower than $970,800, your loan will now be a high-balance conforming home loan rather than a jumbo loan, and your rates of interest will be lower.  

Conforming home loan limits are the maximum mortgage loan that Fannie Mae and Freddie Mac (the firms) will buy.  Why is this essential?  When lending institutions make home loans that they can offer to the firms, the financiers in those loans understand that their financial investment is guaranteed by the U.S. Government.  Because of this, they are willing to accept a lower yield on their investment. 

This is handed down to you as a lower rate of interest.

Conforming Loan Limit – Background

The FHFA just made the rate of interest lower. The national conforming home loan limit is set based upon the nationwide typical sale price of single family homes.  As the average price rises, the Federal Housing Finance Agency (FHFA, the parent organization of Fannie Mae and Freddie Mac), increases the conforming home loan limit.  Home mortgages greater than this limit are called non-conforming loans, or by custom, jumbo loans.

High Balance Conforming Loan Limit

After the home mortgage crisis of 2008, the number of lending institutions who were using jumbo loans diminished dramatically.  In action, the firms developed a secondary tier of conforming home loan limits for high-cost areas, called high-balance conforming loans.  This amount is set county-by-county across the nation, based on the mean rate in each county, with a difficult limitation at 150% of the across the country conforming home loan limitation.

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New Conforming Home Loan Limits for 2022

The FHFA has assessed the boost in mean home loan rates from October 2020 to October 2021 and has provided the brand-new conforming loan limitations for 2022.  Starting January 1, 2022, the firms will purchase conforming home loans approximately $647,200 and high-balance conforming home loans as much as $970,800.  This compares to the 2021 conforming home loan limits of $548,250 for conforming home loans, and $822,375 for high-balance conforming home loans.

When Do 2022 Conforming Loan Limits Go Live?

Rates were simply lowered November 30, 2021.  The brand-new conforming home loan limitations technically go live on January 1, however many lending institutions will accept applications since December 1.  Some lending institutions have beat the gun and have been using conforming home loans as much as $625,000 for a month or two currently.  However, that was just an educated guess.  Today’s statement is the genuine offer.

Conforming Loan

What the Interest Rate Reduction Means

This makes a HUGE distinction on the high balance mortgages, due to the fact that underwriting guidelines for jumbo loans is much more stringent.  For instance, very few loan providers use jumbo loans with less than 20% down.  Those that do charge a rather steep premium  Let’s have a look.

If you are putting 10% down on a purchase of $1,078,000, you would have a new home loan of $970,200, within the new high balance adhering loan limitation.  A competitive interest rate as of today’s writing would be 3.000% for a 30-year set mortgage with a payment of $4,090.40.  If you needed a jumbo loan, your rate of interest would be 4.250% (because you have less than 20% down and it’s a jumbo loan.)  Now your payment is $4,772.80.

To get your payment back down to earth, you could put 20% down and now your home loan balance would be $862,400, your rates of interest would return down to the 3.000%

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range, and your payment would be workable.  However, do you have the extra $108,000 laying around?  If your loan were still a jumbo loan, you would need to come up with more money for the deposit or more money every month.  Today, it’s a conforming home loan.

The new conforming home loan limits increase your loan power in high-cost areas significantly. 

Get the most Affordable Interest Rates

There are at least 3 methods to keep your home loan balance within the conforming home loan limitations or at least keep the rates of interest affordable:

First – Lower your price expectation on your brand-new home.  

Second – Put 20% down.  

Third – Use 2 loans – a conforming first mortgage and a purchase money 2nd or a house equity line of credit to make up the difference in the deposit.

When buying a brand-new home, having a home mortgage advisor who understands how to identify and provide you more home options is essential. 

It can save you thousands of dollars that I’m quite sure you might use elsewhere.  The FHFA just made that a little much easier.  Now you understand how interest rates influence the conforming home loan for the buyer.

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