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2022 Loan limits edge toward $1 million

2022 Loan limits edge toward $1 million
Written by Publishing Team

2022 loan limits should be close to $1 million

Each year, the Federal Housing Finance Agency (FHFA) raises loan limits to match mortgages. The next announcement is due before November 30th.

It is very likely that the 2022 loan limits will jump to nearly $1 million in areas where home prices are rising. Even in places where home prices are falling, expect to see those limits rise to about $650,000.

Higher loan limits are good news for homebuyers and homeowners alike. This move should help maintain the cost of home ownership even in places where home values ​​have risen in recent years.

Check your eligibility for a mortgage. START HERE (December 24, 2021)

How high will the matching loan limits go?

Matching loan limits vary by location. It’s higher in expensive central areas, and a little lower in moderately priced areas.

For 2022, loan limits correspond to A Single family home It is expected to be:

  • 650 thousand dollars In most areas
  • Just under a million dollars In expensive areas like New York City and Los Angeles

Loan limits will be higher for multifamily homes of two to four units. So if you are planning to buy a multi-unit home or investment property, you will have more options in 2022 as well.

So, why are Fannie Mae and Freddie Mac’s loan limits rising so sharply? Is this because of the federal government’s sudden rush in generosity?

not exactly. The regulator of the agencies, the FHFA, has a statutory duty under The Housing and Economic Recovery Act of 2008 (HERA) To change these limits every year to keep pace with rising home prices nationwide.

Real estate prices increased in 2020 and 2021.

In fact, at the time of writing, the latest Case-Shiller National Home Price Index says home prices are up 19.8% year over year. And that was a record.

So the massive rise in loan limits is a direct result of rising home price inflation.

What do new loan limits mean for home buyers

The maximum matching loan for 2021 is $548,250 in most areas, and $822,375 in expensive housing markets.

Anyone who wants to borrow more than that currently has to resort to a huge mortgage, which is any loan above those limits.

Now, mega mortgages are good if that’s all there is to you. But it can be difficult to qualify for one. Their mortgage rates are often higher than the matching mortgage rates backed by Fannie Mae or Freddie Mac.

Advantages of matching higher loan limits

Higher loan limits mean that fewer borrowers will have to take out massive loans in 2022. This could open up higher-priced housing markets to a broader group of buyers.

In the past, mega loans often required a down payment of 20% or 30% of the sales price and a credit score of 740. Many lenders still have those types of requirements, and they usually offer competitive rates to those attractive borrowers.

It may be possible to get huge financing these days with as low as 5% or 10% and a credit score as low as 680. However, you are likely to pay a much higher mortgage rate than anyone with high credit and 20% lower.

This is where the new matching loan limits can help.

You may soon be eligible to get that high priced home with a matching loan. These are only available at 3%, 620 credit score, and often an attractive mortgage rate. (However, don’t forget that you may have to pay for mortgage insurance for a while.)

Check your home buying budget. START HERE (December 24, 2021)

What about FHA limits?

FHA limits are changed on the same basis as those of Fannie and Freddie. So they are likely to go up in 2022 by the same percentage.

However, they were calculated slightly differently. So the standard FHA loan limit in modestly priced areas is lower than the limit for matching mortgages.

In some places, the loan ceiling for FHA loans in 2021 was as low as $356,362. But the cap in areas with very high median home prices was the same as the matching mortgage ceiling: $822,375.

If FHA limits rise by the same proportion as those of conventional loans – as expected – we could see FHA 2022 vs. Single family home as height:

  • 422,000 dollars In most areas
  • Just under a million dollars In expensive areas like New York City and Los Angeles

As with matching loans, FHA limits will be higher for 2, 3, and 4-unit properties.

You can discover current match and FHA limits in your area with this search tool.

What about VA loan limits?

VA loan limits were lifted in 2020. So those who qualify for VA loans (including most veterans, service members, and surviving spouses) can borrow as much as they can afford.

But expect lenders to check affordability with a microscope. For very large amounts, you will need to prove that you are a creditworthy borrower and have plenty of income and financial resources.

Official loan limits for 2022 will be announced this month

Remember, none of the new information above has been officially confirmed. We will have to wait for an announcement, expected before 30 November, of the exact numbers.

After the new loan limits are announced, they will come into effect on January 1, 2022.

But it is very likely that the FHFA announcement will confirm that spikes are imminent. And that the actual numbers will be close to those we mentioned.

After all, the regulator uses the “HERA formula” to calculate heights. This is stipulated in the law.

your next steps

What does all this mean for a borrower who wants to buy a home in the right price range? Well, it will depend on your personal circumstances and goals.

If you’ve already found your dream home, you probably shouldn’t mess with the purchase at this point. After all, the seller is unlikely to hang around waiting for you to arrange a mortgage for 2022. And you may risk losing property.

Of course, if you find that you can get a better deal with a matching loan than the mega loan you made, you can always refinance later, provided your mortgage rates don’t go up too much in the meantime.

But suppose you haven’t found that dream house yet. You will then need to design your options with a mortgage calculator, and ask yourself a few questions:

  1. How much can you save by waiting for a compatible loan or FHA instead of a huge loan?
  2. Do you need to act urgently? Not everyone has the luxury of waiting an extra two months
  3. How fast are home prices rising where you want to buy? If it’s too fast, it can eat up your potential savings

Depending on your answers to these, you may or may not benefit from waiting for a conventional or FHA loan in 2022.

Show me today’s rates (December 24, 2021)

The information on the Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed here are those of the author and do not reflect the policy or position of Full Beaker, its officers, parents, or affiliates.

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