A couple of weeks ago, we predicted that the conforming loan limits for 2022 would likely go up due to significant home-price appreciation.
It’s now official. Earlier today, the Federal Housing Finance Agency announced their revised 2022 conforming loan limits for all U.S. counties. As expected, the agency has increased those limits to keep up with rising house values nationwide.
In 2022, the conforming loan limit for a single-family property in most U.S. counties will rise to $647,200. In the more expensive real estate markets — like San Francisco and New York City — the limit will go up to $970,800.
Conforming Loan Limits Increased for 2022
On November 30, the Federal Housing Finance Agency (FHFA) announced they were raising the maximum size for conforming mortgage loans in the U.S. This independent federal agency oversees Freddie Mac and Fannie Mae, the two corporations that buy home loans from lenders.
When a conventional mortgage loan falls within the size limits established by the FHFA, it is referred to as a “conforming loan.” It can therefore be sold into the secondary mortgage market via Fannie and Freddie.
If a person borrows an amount that exceeds the 2022 conforming loan limits, it’s referred to as a “jumbo” mortgage. In general, jumbo loans can have stricter criteria and require bigger down payments. That’s because they bring a higher level of risk for the lender and/or investor.
The 2022 conforming loan limit for most U.S. counties will be $647,200, an increase of nearly $100,000 from the 2021 limit of $548,250. This figure is referred to as the “baseline.”
More expensive real estate markets will have a limit of $970,800. This is known as the “ceiling.” Remote U.S. areas like Alaska, Hawaii, Guam and the Virgin Islands also fall into this high-cost category.
(Note: These numbers apply to single-family properties, in particular. There are higher limits for multi-family housing properties, such as duplexes and triplexes.)
According to the November 30 FHFA news release:
“Earlier today, FHFA published its third quarter 2021 FHFA House Price Index … According to the nominal, seasonally adjusted, expanded-data FHFA HPI, house prices increased 18.05 percent, on average, between the third quarters of 2020 and 2021. Therefore, the baseline CLL in 2022 will increase by the same percentage. “
Revised FHA Limits Expected Next Week
To further complicate things, the Federal Housing Administration maintains a separate set of limits for the popular FHA loan program. And those will likely go up as well.
Note the difference between the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA). Despite their similar names, these are two separate agencies that oversee different mortgage products.
The Department of Housing and Urban Development (HUD) manages the FHA loan program. They typically announce their revised limits about a week after the FHFA announces theirs. That’s because the FHA bases their maximum mortgage amount on the conforming loan limits mentioned above. So their announcement usually comes later.
The one thing we do know is that the FHA loan limits for 2022 will be increased, in response to the FHFA’s recent move. We should know more next week, when HUD makes their official announcement.
What Else Might Be in Store for 2022?
To recap, home buyers and mortgage shoppers will enjoy higher conforming loan limits in 2022. This means they have a higher range of financing available, without having to use a jumbo home loan.
This is one of several mortgage-related changes we could see in 2022. In addition to the revised loan limits, housing analysts and forecasters expect the following trends:
- More purchase loans. Last month, the Mortgage Bankers Association (MBA) predicted that purchase mortgage originations would “grow 9% to a new record of $1.73 trillion in 2022.” Home-buying activity will remain strong next year, in their view.
- Sharp decline in refis. The MBA also predicted a significant slowdown in mortgage refinancing activity, partly due to a rise in interest rates. They expect refinance originations to decline “by 62% to $860 billion from $2.26 trillion in 2021.”
- Higher mortgage rates. As we explained in a recent report, multiple forecasters have predicted higher average mortgage rates next year. Analysts from Freddie Mac and the MBA expect rates to creep upward over the coming months.
- Rising home prices. Based on current conditions within the real estate market, it’s highly likely that home prices in most U.S. cities will continue to climb in 2022. But the gains might be more modest, compared to the astronomical growth seen during 2021.
So there’s some good news and bad news here, from a home buyer’s perspective. Those who need to use a mortgage loan to finance their purchases will have higher conforming loan limits in 2022.
But housing costs will likely continue to climb as well, in most parts of the U.S. So a sense of urgency might still be warranted.