Conforming Loan Limits for 2022 Coming Soon (And Probably Rising)

  • Conforming loan limits for 2022 should be announced later this month.
  • We expect loan limits to go up due to significant home-price growth.
  • They’ve gone up for several years in a row now, for that very reason.
  • Federal housing officials will announce revisions near Thanksgiving.
  • The baseline for most counties could rise to $625,000 for next year.

There’s a very good chance that conforming loan limits will go up in 2022. Home prices in many U.S. cities have risen by record levels over the past year or so. As a result of that trend, we expect the Federal Housing Finance Agency to increase the 2022 conforming loan limits over their current level.

We’ll know more soon enough. Housing officials usually announce such revisions a few days before Thanksgiving each year (to be applied during the following year). And Thanksgiving’s just over a week away.

Higher Conforming Loan Limits in 2022 Expected

A “conforming” loan is one that meets the purchasing requirements used by Fannie Mae and Freddie Mac. These are the two government-supervised corporations that purchase mortgage loans from lenders and sell them to investors.

The main requirement for a conforming loan has to do with its size (i.e., the amount of money being borrowed). There is a limit to how much you can borrow when using a conforming mortgage product. The Federal Housing Finance Agency (FHFA) establishes these size restrictions, which are common known as “loan limits.”

These caps can vary by country, because they are partly based on median home prices. This year, the baseline loan limit for most counties across the U.S. was set at $548,250. More expensive areas like San Francisco and New York City currently have conforming loan limits as high as $822,375. Both of those thresholds will likely go up in 2022.

If you borrow above the cap for your county, it’s known as a “jumbo” mortgage. Generally speaking, jumbo loans come with stricter requirements for credit scores, down payments, and (sometimes) cash reserves.

Most borrowers in the U.S. stay within the conforming range when using a mortgage loan to buy a house. So the official loan limits are pretty important, from a home buyer’s perspective.

Look for the Official Announcement Next Week

Each year, federal housing officials review the conforming loan limits in relation to home-price changes over the past year. When prices rise substantially, the FHFA typically increases the maximum conforming loan size to keep pace.

That’s what we expect to see this year. Given the substantial home-price growth over the past 12 months or so, we will most likely see higher conforming loan limits for 2022.

In past years, FHFA officials have announced revisions during the week of Thanksgiving. The current limits were announced on November 24 of 2020, two days before last Thanksgiving. FHFA will likely follow that “tradition” and publish the (possibly) revised conforming loan limits for 2022 sometime next week.

The agency has signaled that it might increase the baseline limit for most U.S. counties to $625,000 in 2022. But that’s not yet official. Even so, some mortgage lenders are now offering loans up to that amount. Most will likely wait until after the announcement, before adjusting their lending procedures.

We will publish a follow-up to this report if and when those changes happen.

Major Home-Price Growth Recorded in 2021

According to the real estate data company Zillow, the median home value in the U.S. rose by more than 18% over the past year. That’s miles above what is considered to be “normal” appreciation, from a historical standpoint.

But then again, the housing market has been operating outside of normalcy for some time now.

Cities with highly competitive real estate markets have seen even bigger price gains during 2021. For instance, home values in both Austin and Boise rose by more than 40% over the past 12 months, according to Zillow.

As a result of this trend, the conforming loan limits for 2022 will likely go up as well. That means borrowers would have more financing range to work with, when using a “regular” conventional mortgage loan.

The Federal Housing Administration, which manages the popular FHA loan program, has its own set of limits. Sometimes their FHA caps align with the conforming limits — other times they are different. FHA will likely announce any changes to their program during the first week of December, as they’ve done in years past.

Meanwhile, Housing Affordability Continues to Drop

Having higher conforming loan limits in 2022 could benefit many borrowers. But it won’t offset a bigger problem within the housing market, which is a lack of affordable housing.

Over the past couple of years, home prices in the U.S. have risen much faster than incomes — on average. In fact, it hasn’t even been close. This has caused a further decline in affordability nationwide, and especially in hot housing markets.

According to a September 2021 report from ATTOM Data Solutions:

“…median-priced single-family homes are less affordable in the third quarter compared to historical averages in 75 percent of counties across the nation with enough data to analyze. That is up from 56 percent of counties in the third quarter of 2020, to the highest point in 13 years, as home prices have increased faster than wages in much of the country.”

House values in the U.S. are expected to continue climbing in 2022, though possibly at a slower pace. Forecasters predict that mortgage rates will inch upward over the coming months, as well. Those trends could further erode housing affordability.