Conforming loanThe Federal Housing Finance Agency recently announced a raise in the conforming loan limits (CLL) for Fannie Mae and Freddie Mac in 2022. In most of the U.S., the maximum conforming loan limit for one-unit properties will rise to $647,200 in 2022 — an increase of $98,950 from the 2021 level of $548,250.

The 2022 CLL reflect the changes in the 2021 housing market when home prices skyrocketed virtually everywhere across the country. According to the latest quarterly report from the National Association of Realtors®, the median sales price of single-family homes rose in 99% of measured market areas nationwide, with double-digit price gains in 78% of the markets.

For high-cost areas in which 115% of the local median home values exceeds the baseline limit, the new ceiling loan limit for one-unit properties in 2022 will be $970,800. For multiple-unit properties, the changes are as follows:

  • For 2 units, the baseline limit will rise to $828,700 and up to $1,243,050 for high-cost counties.
  • For 3 units, it will be up to $1,01,650 and $1,502,475 for high-cost counties.
  • For 4 units, it will be up to $1,244,850 and $1,867,275 for high-cost counties.

Limits on the rise

The Housing and Economic Recovery Act (HERA) requires that the baseline CLL for the Enterprises be adjusted each year to reflect the change in the average U.S. home price. After a lull in increases from 2006 to 2016, the FHFA has been continually raising the conforming loan limit year after year. Since resuming the increases in 2017, the FHFA has expanded the conforming loan limit by more than $230,000.

In determining 2022 CLLs, FHFA used the nominal, seasonally adjusted, and expanded-data housing price index (HPI) to calculate the proportional change between the 2020 Q3 and 2021 Q3 index values. The FHFA has a great map showing conforming loan guidelines across the country.

What does this mean for homebuyers?

These new limits should allow homebuyers and investors to secure larger loan amounts with lower interest rates since rates are typically lower for government-backed loans. If loan limits held you back in the past or you are in the process of getting a Non-QM or alternative loan due to loan limits, call us now.

For more information on this announcement, click here.

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