Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the financial benefits that come with rising home equity.
However, not every purchaser has been able to fulfill their desire for a new home. Homebuyers faced two obstacles:
- Saving for a down payment;
- Qualifying for a mortgage under current lending standards
Now the FHFA (which handles mortgages by Freddie Mac, Fannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit. Conforming Loans meet the requirements to be acquired by Freddie Mac and Fannie Mae, whereas Jumbo Loans do not. Jumbo Loans exceed the conforming loan limit. A jumbo loan isn’t backed by any government guarantees, making them a higher risk for lenders. To compensate, lenders often tack on higher interest rates and higher down payment criteria for jumbo loans.
But last week the FHFA significantly increased its Conforming Loan Limits for 2022. FHFA Acting Director Sandra L. Thompson issued a press release that read indicated a new baseline limit of $647,200 for most counties, with approximately 100 counties having loan limits approaching $1 million.
This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year. The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers.
Buying your first or your next home may have just gotten much easier and less expensive. Get in touch to see how these changes may impact you.