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  • Writer's pictureAshton Acree

Conventional Loans Just Got A MASSIVE Upgrade

Updated: Jan 4, 2022

Key Points

  • FHA mortgage limits increased 18% for 2022, the most significant increase ever.

  • You can now possibly buy a million-dollar property with $34,000 out of pocket.

  • First-time homebuyers can get a loan for up to $647,200.

The Federal Housing Administration (FHA) increased its loan limits for single-family homes in 2022, allowing borrowers with lower credit scores to take out a higher loan amount.

For most of the U.S., the loan limits for FHA mortgages will increase in 2022 to $420,680 for most counties, specifically in areas where 115% of the median home price is less than this limit. This equates to 65% of the newly-announced conforming loan limit of $647,200 for conventional loans.

Areas in which 115% of the median home price is above the new FHA mortgage limit are considered high-cost areas, and have a new loan limit ceiling of $970,800.

How do the loan limits impact buyers?

What came first, the chicken or the egg? In this case, we know that the housing prices prompted the increase in mortgage limits, but it begs the question as to whether it will further support or perhaps even fuel the soaring home prices further. An FHA loan requires the borrower to reside in the home, so the new limits won't impact real estate investors directly. However, I firmly believe this will dramatically expand the market -- and thus competition -- for buyers at this higher price point.

Keep in mind that these limits are maximums and that the mortgage must be paid back. Borrowers will need to have sufficient income to support the payments in addition to their other financial obligations. Maxing out offers up to allowable limits just to get in a house may set the stage for unsustainable payments, leaving overextended buyers in quite the pickle. Time will tell how this plays out, but for now, it's safe to say that buyers will now have cheap, easy access to more money than ever before.

If you want to take advantage of higher loan limits through a new home purchase or refinance, don't hesitate to reach out! I'd be more than happy to help guide you through the process, and I'm only a phone call away.

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