New Conforming Loan Limits for 2022

Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1 Million

The maximum size of home-mortgage loans eligible for government backing will jump to $970,800 next year in high-cost markets.


What does it mean?

Because home prices have increased about 18% over the last year while demand stays high and inventory is low, the baseline conforming loan limit for 2022 will be $647,200 in average cost areas while the limit is raised to $970,800 in higher cost areas. Major markets in California are good examples of high-cost areas.

This means that federally backed loans with low interest rates, more expanded guidelines (lower credit score thresholds and down-payments), and a faster process will be easier to secure. These limit increases will be particularly beneficial in high-cost areas where they would be pushed into a jumbo loan (over the conforming limit).

Help for the Self-Employed

Conforming loans allow for more flexibility when it comes to income requirements. This is important for self-employed individuals in Carlsbad, California (intentional to use a location?) who generally have to jump through more hoops with income verification.

Concerns About the New Conforming Loan Limit

The increase in loan limit aims to fix an acute issue happening nationwide and especially in “high cost” areas such as the Bay Area, Los Angeles and Orange County. There are growing concerns about home prices rising faster than income, leaving some homebuyers in mortgages that are technically too high for their income and taxpayers on the hook if they default. With the increase, expensive homes also exacerbate the supply chain issues we are already seeing.

If you feel like these are heavy waters to navigate, we can help. You need to work with a well-informed, strategic mortgage advisory company when making big decisions with big price tags. Contact us today!