In this blog, we will cover and discuss Fannie Mae Conventional loan limits on one to four-unit properties. The FHFA increased conventional loan limits for six years in a row due to increasing home prices so homebuyers are not priced out of the housing market. As we approach the end of the year, the Federal Housing Finance Agency has increased conforming loan limits for the calendar year of 2022. They made this announcement in November 2021.
The FHFA Announces Increase in 2022 Conforming Loan Limit
The announcement today released the increase to $647,200 in traditional median-priced areas of the United States. For high-cost counties, the ceiling on conforming loans was capped at $970,800 for single-family homes. That is a substantial increase for one calendar year. While these go into effect on January 1st, 2022 many investors are already allowing the new loan amounts. We now have the ability to write loans with the increased loan amounts as of January 1st, 2022. If you are about to start a mortgage application, please reach out to us at Gustan Cho Associates. We are experts in mortgage lending and are up-to-date with the new loan limits. In this article, we will cover and discuss Fannie Mae Conventional Loan Limits On One To Four Unit Properties.
Fannie Mae Conventional Loan Limits Increase For 6 Years In A Row Due To Rising Home Prices
The Federal Housing Finance Agency determines a baseline loan limit each year. The Housing and Economic Recovery Act (HERA) requires Fannie Mae and Freddie Mac to reflect changes in average home prices in the United States each year; After quarter 3 2022 home price index numbers were released, the Federal Housing Finance Agency met and came up with the new standards for 2022.. During their meeting, they understood that US home values have continued to increase over the past four financial quarters.
Fannie Mae Conventional Loan Limits Increase Due Home Prices Skyrocketing 10% in One Year
House prices increased 9.9% on average between quarter 3 of 2020 and quarter 3 of 2021. As you can see the baseline maximum conforming loan limit in 2020 has increased by that same percentage, 9.9%. The new limit of $647,200 will cover the majority of the US for single unit dwellings. Later in this blog, we will explore 2 – 4 unit properties.
Fannie Mae Conventional Loan Limits In High-Cost Areas
Will there be a high-cost area in 2022?
Yes, many areas of the United States have an average house price well above the nation’s average. For areas in which the local median home value exceeds the Baseline median home line value by at least 115%, those areas will have a higher baseline loan limit. These counties are simply called high-cost areas. Part of the Housing and Economic Recovery Act established the maximum loan limit in those areas as a multiple of the area median house value while setting a ceiling on that of a limit of 150%. Sounds incredibly confusing, but all this is stating that the maximum high balance conforming loan limit will have a ceiling of $970,800. Simply 150% of $647,200. There are special provisions that establish a different loan limit calculation for:
- Alaska
- Hawaii
- Guam
- US Virgin Islands
In these areas, the loan limit will be $970,800 for all one-unit properties. Here is a link for an interactive map so you can check the loan limit in your specific area: FHFA Conforming Loan Limits
Rising Home Prices Forces Fannie Mae Conventional Loan Limits Increase
After all the data was examined for the past four quarters in the US housing market, a general trend showed rising home values. This created an increase in the baseline loan limit and an increase in the overall ceiling or maximum conforming loan limit. What does this mean? This gives many Americans the opportunity to afford more houses without entering the Jumbo mortgage arena. Jumbo financing often is tough to obtain. With strict credit scores and cash reserve requirements, many Americans cannot obtain a jumbo mortgage. Jumbo mortgages also require a higher down payment.
Fannie Mae Guidelines on Conventional Loans
To obtain a conventional loan, you only need a credit score of 620. We do not have any lender overlays on any conventional mortgage product. Meaning we go directly off Fannie Mae and Freddie Mac guidelines, with nothing additional. If you have any questions, please reach out to Mike Gracz on (800) 900-8569 or text us for a faster response. Or send an email to gcho@gustancho.com. Gustan Cho Associates are direct lenders with no overlays on government and conventional loans. This announcement from the Federal Housing Finance Agency pertains to conventional financing only. If you have a specific question you can also contact the Federal Housing Finance Agency directly, Stefanie Johnson (202) 649-3030 or Corinne Russell (202) 649-3032 are listed as contacts on the FHFA website.
Loan Limits On Multi-Unit Properties
What about multi-unit homes? The chart below will detail the increases for multi-unit properties. The increases are very similar to the 9.9% increase in single-dwelling homes.
2022 Loan Limits Has Increased For Six Years In A Row
The Federal Housing Finance Agency (FHFA) announced an increase in the conforming loan limits for 2022, effective January 1, 2022 For non-high-cost counties, the conforming limit for a one-unit property will increase to $647,200. Similar increases have been made to the 2-4 unit and High-Cost limits as shown in the following table. FHA announced the 2022 FHA Low-Cost Area (FHA floor) at $420,680 and High-Cost Area (FHA ceiling) mortgage limit at $970,800
|
Conforming Maximum Loan Limits |
||
|
Units |
The Contiguous States and District of Columbia |
Alaska and Hawaii and High-Cost Counties |
|
1 |
$647,200 |
$970,800 |
|
2 |
$828,700 |
$1,243,049 |
|
3 |
$1,001,650 |
$1,502,474 |
|
4 |
$1,244,850 |
$1,867,274 |
Many counties in California fall in the high-cost area and homebuyers are eligible for high-balance conforming loans. Arlington, Virginia; and Jackson, Wyoming have substantial high-cost counties. Many homebuyers in these states often are in high-cost areas and are eligible for the maximum conforming loan limits, while cities like Seattle, Washington and Baltimore, Maryland, St. Louis, Missouri, Tampa, Florida, Birmingham, Alabama, Joliet, Illinois fall between the “floor” and the “ceiling.”In Alaska, Hawaii, Guam, and the U.S. Virgin Islands – which follow their own loan limit rules – the maximum loan limit for 2022 is $970,799 for a one–unit property.
HUD Loan Limits Versus Fannie Mae Conventional Loan Limits
Now, what about FHA financing?
HUD announced an increase in FHA loan limits at $420,680 for traditional median-priced areas on single-family homes and up to $970,800 for high-cost ares for 2022. In the past, HUD does mirror the increases in conventional lending.
