FHA Loan Limits Increase for 2022
What you need to know about the new changes and how they will help you afford the home of your dreams
If you're in the market for your dream home, then 2021 has probably brought a few bummers. Tight markets, low inventory, high building costs, and eye-popping list prices that can make that dream seem even more out of reach. But it's time for some good news.
The Federal Housing Administration (FHA) just announced relief for those hoping to buy a home this year.
As of January 1, 2022, the loan limits for FHA-backed loans will rise 18%—a record increase—to reflect the market and allow qualified buyers to continue to access affordable home financing.
In simple terms, this means buyers with FHA loan products will be able to potentially borrow more to keep pace with rising home prices.
What is the FHA Loan Limit?
The Federal Housing Administration, or FHA, was created to support low- to moderate-income homebuyers. The FHA sets loan limits each year for buyers utilizing FHA loans (any loan from a bank or mortgage company that is insured or backed by the FHA) and those limits are based on the average home price for the area in which you are buying a home. The more expensive the average home, the higher the loan limit. The limit is calculated at 115% of the area's median home price, or 150% in high-cost areas.
Each year, the FHA adjusts the loan limits based on the most current sales data available. The loan limits fluctuate with the industry, rising and decreasing with home prices. This is to ensure that buyers in high-cost areas have a fair chance at securing a loan that can help them get into an expensive market.
FHA loan limits, as revised for the new year, apply only to case numbers assigned on or after January 1st each year.
What Changes to FHA Loan Limits Will There Be in 2022?
New loan limits for the calendar year 2022 for its Single-Family Title II forward and Home Equity Conversion (reverse) Mortgage (HECM) insurance programs.
Loan limits for most of the country will increase due to the changing home prices being experienced nationwide, to help those with FHA loans remain competitive as buyers and participate in the real estate market.
What will those changes look like? In 2021, the FHA loan limits for a single-family home ranged from $356,362 to $822,375, depending on the county where the property is located.
For 2022, those limits increased 18% and will range from $420,680 to $970,800, with most limits nationwide falling in the $650,000-range. The higher range addresses extremely high-cost markets such as the Washington, D.C., Boston, Los Angeles, Denver, and Seattle areas.
The $420,680 figure is calculated at 65 percent of the national conforming loan limit. This "floor" applies to those areas where 115 percent of the median home price is less than the "floor" limit. Any area where the loan limit exceeds this "floor" is considered a high-cost area, and the NHA requires FHA to set its maximum loan limit "ceiling" for high-cost areas at $970,800
So what does it all mean for you? A better chance at affording a home in an increasingly changing market. Working with an experienced loan officer will help you navigate these changes and make the most of your buying power. Buying a home is stressful, but at Lennar Mortgage we're committed to simplifying the process and staying with you every step of the way.
Sources:
https://www.hud.gov/press/press_releases_media_advisories/HUD_No_21_197
https://themortgagereports.com/87013/2022-loan-limits-edge-toward-1-million
http://www.homebuyinginstitute.com/news/official-2022-loan-limits-rise/