New Conforming Loan Limits for Conventional Loans in 2022
Plus Increases in FHA LIMITS
2022 Conforming Loan Limit Article:
The Federal Housing Finance Agency (FHFA) announced in November 2021 that the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2022 would be raised again by almost $100,000 from to $548,250 to $647,200, effective January 1, 2022. Many lenders were already offering the higher limits before the end of 2021. FHA Loan limits also increased – see below.
- The average increase for the House price Index rose 18.04% for the year which is the reason for the increase over the 2021 loan limits. In most of the U.S., the 2022 maximum conforming loan limit for one-unit properties will be $647,200, an increase from $548,250 in 2021.
Fannie and Freddie have set underwriting rules that conforming loans must adhere to including credit and income requirements. These are also referred to as conventional loans and are under jumbo loan amounts.
They are considered lower risk and after closing the loans are sold to investors on the secondary market. As a result, mortgages with conforming loan amounts tend to carry lower mortgage rates than jumbo loans which are above the conforming loan limit.
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Conforming Loan Requirements
* the loan amount must be at or below the conforming loan limit
* there is a minimum credit score requirement generally of 620 FICO
* a Debt to Income Ratio Below 43%
* a down payment of at least 3%
* the loan must meet qualifying guidelines set by Fannie Mae or Freddie Mac
* there are other underwriting criteria as well
* these limits apply to 1 to 4 unit residential properties
The conforming loan limit can change annually, as determined by the FHFA, based on any changes to the October-to-October Home Price Index report. This report includes estimates for the increase in the average U.S. home value over the last four quarters, and showed that home prices increased 18.04%, on average, between the third quarters of 2020 and 2021. It is announced in November and goes into effect on January 1st.
The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000. Back in 2016, the FHFA increased the conforming loan limits from $417,000 to $424,100. Then, in 2018, the FHFA raised the loan limits from $424,100 to $453,100 and then again to $484,350 in 2019.
The limit was raised to $510,400 in 2020, then to $548,250 in 2021..
Now for 2022, the FHFA has increased the loan limit again by $98,950 to $647,200.
Conforming Limits Apply to 1 to 4 Unit Residential Properties:
One-unit properties: $647,200
Two-unit properties: $828,700
Three-unit properties: $1,001,650
Four-unit properties: $1,244,850
These residential property limits generally apply to the continental US states and all the counties in Southeast Florida and the Treasure Coast (except Monroe County – see below) – Miami-Dade, Broward, Palm Beach, Martin, St Lucie, Okeechobee, Indian River and Brevard Counties.
There are a few counties in the US that have “high cost areas”, where 115% of the local median home value exceeds the baseline loan limits. Here is a link to a national map showing all counties and their loan limits for a 1 – unit home in case you are interested for any other parts of the country.
There is only one county in Florida and that is Monroe County and includes the Florida Keys and the lowest southwest section of Florida west of Miami-Dade county.
Monroe’s limits are: $710,700, $909,800, $1,099,750, $1,366,750
For one-unit properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the conforming loan limit is $970,800.
FHA Also Increases 2022 Loan Limits
FHA’s also establishes loan limits for low-cost and high-cost areas It establishes a “floor” for low-cost areas, which it defines as counties where the median home price is 65 percent or less of the Federal Housing Finance Agency’s (FHFA) conforming loan limit. Nationally, the low-cost limit or floor will increase to $420,680 in 2022 from $356,362 in 2021. However, per the summary below, the South Florida and Treasure Coast Counties are higher.
FHA has published separate pages listing those counties with loan limit increases and decreases, as well as a County Search Page allowing users to search for loan limits by county.
FHA Loan Limits Variations by South Florida and Treasure Coast Counties
St Lucie County – $431,250 in 2022, up from 381,600 in 2021, an increase of 13%
Martin County – $431,250 in 2022, up from 381,600 in 2021, an increase of 13%
Okeechobee, Indian River and Brevard Counties – $420,680 in 2020, up from $356,362 in 2021, an increase of 18%
Palm Beach, Broward, Miami-Dade Counties – $460,000 in 2022, up from $402,500 in 2021, an increase of 14.3%. These figures are based on the Metropolitan Statistical Area of “Miami-Fort Lauderdale-West Palm Beach, FL” vs. by county.
Monroe County / Key West – $710,700 in 2022, up from $608,350 in 2021, an increase of 16.8%.
Similarly, FHA also establishes a maximum loan limit for high-cost areas, where the median home price reaches or exceeds 150 percent of the conforming loan limit. The high-cost loan limit will increase to $970,800. The loan limits for Alaska, Hawaii, Guam, and the Virgin Islands are set at $1,456,200 to reflect high construction costs.
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