Conforming Loan limits increasing in 2022
Expected to be announced November 1, 2021, the projected Conforming Loan Limit for 2022 will be $625,000 for a single unit property. This is great news for many of you aspiring homebuyers who would like to get that “conforming interest rate” at what would have formerly been considered a high balance loan amount. Same goes for homeowners who still wish to refinance near historical lows. This adjustment upwards will create some breathing room for you to still lock in a low rate with a higher loan balance.
What is the Conforming Loan Limit?
The conforming loan limit is the loan size limits accepted by Fannie Mae and Freddie Mac. Mortgage loans written up to this loan amount limit are accepted and guaranteed by Fannie Mae and Freddie Mac when the borrower(s) and property satisfy all conditions of underwriting. The conforming loan limit is determined by county; however most contiguous counties are assigned the same baseline loan limit.
Why is the new Conforming Loan Limit announcement important?
For many years the conforming loan limit was at $417,000 and had no real reason or rationale to be adjusted upwards. This limit allowed for the majority of counties across the country to have Fannie Mae and Freddie Mac backed loans issued by banks at an attractive and affordable interest rate. Afterall, homeownership has been the most sought-after aspect of the “American Dream” for decades. From 2007 to 2016 this was the case with the conforming loan limit, stuck at $417,000 until in 2017 it made it first gradual increase.
As you can see from this chart, the conforming loan limit has risen annually over the past 5 years and is projected to increase again in 2022. This is being interpreted as great news for homeowners.
Remember that anything over the $625,000 loan amount on a single unit property is considered “Jumbo” or “High Balance”. Since those types of loans do not come with the Fannie Mae or Freddie Mac guarantee, they tend to carry higher interest rates. We covered this before when discussing rates through the lens of supply and demand. Since there is a lower supply of money for Jumbo loans, the rates are higher. It is not only because the loan amount itself is higher, as that isn’t necessarily the only indicator of risk to a lender. Rather, the supply of money available for high balance loans is scarcer, and that is the primary reason for why Jumbo loans carry higher rates. Therefore, the conclusion here is that affordability has been dealt a nice hand coming into the end of 2021 and for all of 2022. With conforming rates coming to the market for all borrowers looking to finance up to $625,000 this will really help fight off the recently increasing cost to borrow at these higher loan amounts.
It gets even better for those of you seeking financing for multiple unit properties. Take a look at these conforming loan limits for multi-unit purchases and refinances below. We already have 2 bank lines offering the new 2022 conforming loan limits now, with continuation through 2022.
- One-unit properties: $625,000
- Two-unit properties: $800,250
- Three-unit properties: $967,250
- Four-unit properties: $1,202,000
What this means to you:
- If you are a buyer in the market right now, you are going to start seeing conforming loan rates up to $625,000 for your purchase financing. This is great news for those of you who were looking to finance more than $548,250 because now you can get that conforming rate with a higher loan balance. Further, this is the 2022 limit which you are getting a jump start on especially if you are in the market right now. Be sure to talk with your loan officer and if you need to re-run your qualification scenario based on this new information, do it and ensure you are making your strongest offer with this new information in hand.
- If you need to refinance your home and your loan balance is between $548,250 – $625,000 you can now do that with conforming loan limit pricing (as opposed to jumbo rate pricing). Whether it is a rate and term refinance or a cash out refinance, you can now apply for a refinance up to $625,000 with corresponding conforming interest rate pricing. Banks are already currently accepting refinance applications under this new guidance as of the posting of this article.
The mortgage industry is overall very excited about this new announcement. So much so that they are giving homeowners a head start on these new conforming loan limits prior to 2022. To get your loan process started today and take advantage of these new increased loan limits early, click here.
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Rates & Fees Disclosure:
‡ The payment on a $300,000 30-year fixed-rate VA loan at 3.000% with a 80% loan-to-value ratio is $1,292.01 with 0 (zero) origination points due at closing. The annual percentage rate (APR) is 3.235%. Payment does not include tax and insurance premium impounds. The actual payment amount will be greater. By refinancing your existing loan, the total finance charges may be higher over the life of the loan. Some state and county maximum loan amount restrictions may apply. Appraisal fee of $600, Processing Fee of $895, Underwriting Fee of $795 included in APR calculations with borrower paying 0 (zero) loan origination points.
‡ Based on Mortgage Heroes internal data.
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