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2022 Mortgage Loan Limits – How much can you Borrow?

Jan 4, 2022 | Blog, Mortgage

Each year the mortgage loan limits are up for review and 2022 is a big year for increased limits. Thanks to high appreciation, loan limits are seeing one of the largest increases in a long time.

Like most years, there is a conforming loan limit for typical areas and then a higher limit for certain high-cost areas, with some limits as high as $1 million.

Conventional Loan Limits

The 2022 loan limit for conventional loans in most areas is $647,200. This is a difference of $98,950. Homes located in higher cost areas may secure a loan for as much as $970,800, but the area must qualify as high cost.

Over 60% of home loans today are conventional loans, so these numbers are important to most homebuyers.

FHA Loan Limits

If you don’t qualify for conventional financing because you have less-than-perfect credit or a high debt-to-income ratio, an FHA loan can be a good alternative.

FHA loans have competitive interest rates and require just 3.5% down, but they have lower loan limits. Despite the “lower limits,” FHA limits for 2022 are higher than 2021 and offer a generous loan amount of $420,680 in low and average-cost areas and as high as $970,800 in high-cost areas.

FHA loans work a little differently than conventional loans, though. The limits vary by county and are based on the average cost of homes in the area.

VA Loan Limits

Even better news for veterans is the lack of loan limits for VA loans. As long as veterans can prove they can afford the loan, they can borrow as much as they need to buy a suitable home in 2022.

Proving you can afford the loan means showing you have the income to cover the payment, your existing debts and have enough disposable income to cover the daily cost of living. VA loans don’t require a down payment, but they do have an upfront funding fee veterans must pay to secure the loan.

Which Loan is Right for You?

In 2022, you have many options for home loans, especially if you are a veteran. All three loan programs provide increased limits and flexible guidelines.

To decide what’s right for you, evaluate the following:

  • Do you have good credit (680 or higher)?
  • Do you have over 3.5% to put down on a home?
  • Do you need a high loan amount?
  • Do you live in a high-cost area?

Compare your loan options by looking at the interest rate, fees, and overall cost of the loan over its term to decide which loan is right for you.

Final Word

The increased loan limits in 2022 make it much easier to buy a home this year. With the increased competition for homes over the last 2 years, the higher loan limits make it easier to win the bid on a home even in a bidding war.

Look at the overall cost of the loan, what you can afford, and how the loan affects your finances long term to decide which loan is right for you in 2022.