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Conforming Loan Limits for 2022

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Conforming loan limits are the basic criteria a home loan and a homebuyer must meet for a conforming loan — the most common type of mortgage. If you meet these guidelines, you can qualify for a lower interest rate and thus a lower monthly house payment.

What is a conforming loan limit?

A conforming loan limit refers to the maximum dollar amount you can borrow for a residential mortgage and still meet lending guidelines. This limit is based on the median home value in each U.S. county and varies depending on the property’s location. The 2022 conforming loan limit for one-unit properties in most of the U.S. is $647,200, but can go up to just under a million — $970,800 — in high-cost areas. This is an 18% increase over last year.

2022 Conforming Loan Limits
Units Most of the continental U.S. and Puerto Rico Alaska, Guam, Hawaii and the U.S. Virgin Islands
1 $647,200 $970,800
2 $828,700 $1,243,050
3 $1,001,650 $1,502,475
4 $1,244,850 $1,867,275

Other conforming loan limits apply to the potential borrower. Typically, borrowers must have a:

  • Minimum 3% down payment
  • Maximum 45% debt-to-income (DTI) ratio
  • Minimum 620 credit score

Exceptions: Conforming loan limits for high-cost areas

Some parts of the U.S. have a higher loan limit. House prices can vary greatly, from the idyllic countryside to the bustling cities. In areas the FHFA deems to be “high cost” based on an area’s median home values, the top limit for a single-family home is $970,800. Areas in the continental U.S. with this limit include San Francisco, New York and Washington, D.C. Look up your county’s limit on the FHFA’s interactive map.

Who sets the conforming loan limit?

The Federal Housing Finance Agency (FHFA) sets the conforming loan limits. The government-supported Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) can’t purchase mortgages that don’t meet the limits.

These two enterprises purchase home loans from lenders and package them into securities, selling them as fixed-income investments that typically come with the guarantee that Fannie and Freddie will pay investors if a borrower defaults. This diversifies and reduces risk, helping loans to have lower interest rates.

What are the benefits of a conforming loan?

Lower APR. Conforming loans are beneficial because it helps buyers to qualify for the lowest possible interest rates and therefore lower monthly payments.

Choice of lender. If a lender has the option to sell your mortgage to Fannie Mae or Freddie Mac, it’s a safer investment for them. Many lenders prefer to work with mortgages that meet the conforming loan limit. If you plan to borrow within the limit, you have a wide range of lenders to choose from.

No residency restrictions. Conforming loans aren’t restricted to primary residences; they’re also available for investment properties.

Conforming vs. conventional loan

There are many types of conventional loans. The term “conforming” is an umbrella term. For example, a conventional loan can either be conforming or non-conforming.

Conventional loans are mortgages made by private lenders that aren’t guaranteed by government agencies, such as the Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA). About half of such loans are conforming — all non-conforming loans are conventional loans.

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What are jumbo loans?

Jumbo loans are non-conforming morgages that exceed the maximum loan amount allowed for the area. They may have higher interest rates and fees. A jumbo mortgage typically requires:

  • A higher down payment, usually 20% or more.
  • A high credit score — 680 or higher.
  • A low DTI ratio — 45% or lower.
  • At least several months of cash reserves.

Jumbo loans allow a consumer to borrow more money but often come at a higher price.

How to borrow in excess of the conforming loan limit

To take out a jumbo loan, you should meet the requirements set above and research jumbo loan rates and lenders. Because jumbo loans typically have a higher interest rate, it’s important to shop around for the lowest interest rate.

It doesn’t hurt your credit score to apply with several lenders any more than it does to apply with just one, as long as you complete all applications within a two-week time frame. The three main U.S. credit bureaus allow this window so consumers can rate shop without penalty.

 

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