The 2022 Conforming Loan Limit Explained

Last year was record-breaking in many ways for those in the housing market. Interest rates dipped to historic lows and real estate prices skyrocketed across the country. This has put pressure on buyers to acquire bigger mortgages, a trend that will continue throughout 2022.

Luckily, the conforming loan limit has expanded along with inflation. What does this mean, exactly, and what's the cap for 2022? Read on to find out.

What is a conforming loan?

A conforming loan is a mortgage that meets the threshold set by the Federal Housing Finance Agency (FHFA) and the two government-backed mortgage companies, Fannie Mae and Freddie Mac.

To qualify as conforming, the home loan cannot exceed the FHFA’s current dollar limit, which changes each year. While these institutions don't issue the loans themselves, they insure mortgages that meet the guidelines. In addition to expanding affordability, this type of loan often boasts a lower interest rate than its non-conforming counterparts.

Will conforming loan limits change in 2022?

You bet! The conforming loan limit for 2022 is $647,200 throughout most of the United States. This is a substantial 18% jump from $548,250 in 2021.

Counties our Portland-based credit union serves (including Multnomah, Clackamas, Clark, Washington, and Hood River) are right at $647,200. In more popular real estate markets and pricier parts of the country, the conforming loan limit is as high as $970,800. You can use the FHFA's map to check the conforming loan limit in your area.

Just north in Washington state's Seattle-Tacoma-Bellevue area, the conforming loan limit is $891,250.

What this means for you

So, what does all this mean for borrowers? Whether you're a first-time homebuyer or are looking to move into a larger home or a more expensive area, a higher conforming loan limit might mean you can borrow more money to buy a house and potentially lock in a lower interest rate with your lender.

Consider that the limit is a cap on how much you can borrow, not necessarily the price you can afford. In other words, the more you're able to put down on a home, the higher the total home price you can get.

Here's how much you can afford with a $647,200 loan and different down payment amounts, giving potential homeowners more accessible options based on their mortgage savings accounts.

Current homeowners might be able to refinance their jumbo loans to a low-interest conforming loan and potentially drop their private mortgage insurance (PMI) while they're at it.

This increase in loan limits for 2022 means that more potential home-buyers can be competitive in the market. It allows them to afford houses without the need for more complicated loans or larger down payments. While this expanded cap opens doors to affording more properties, many prospective buyers are still facing low inventory and bidding wars.

Conforming loan requirements

The specific requirements vary among lenders, but conforming loans must meet the guidelines set by Freddie Mac and Fannie Mae.

To qualify for a conforming loan, you'll likely need:

At least 3% in cash for a down payment
A credit score of 620 or higher
A debt-to-income ratio no greater than 43%
No major derogatory marks on your recent credit, such as repossession or bankruptcy
Two or more years of stable income and employment

While credit unions often approve loans for those with less-than-perfect credit, some lenders require a credit score of 640 or even 660. For those who started a job less than two years ago but were consistently employed before that, an offer letter may suffice.

Mortgage solutions from our local credit union

Consolidated Community Credit Union is dedicated to providing flexible lending solutions and competitively low interest rates for people from all walks of life. Members can get adjustable or traditional fixed-rate mortgages, including FHA loans, and can get free appraisals up to $700 with home loans closed through CCCU. We even offer 100% financing for income-approved borrowers.

Become a member of CCCU, complete your mortgage application today, or email CCCU's VP of Real Estate Lending, Brent Schreiber, at bschreiber@consolidatedccu.com.