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Published: Nov 30, 2021 3 min read
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Skyrocketing home prices have plagued buyers for much of the last year. While 2022 will likely see more of the same, homebuyers will at least have one new crutch to lean on: Bigger government-backed mortgage loans.

According to the Federal Housing Finance Agency, conforming loan limits — or the maximum buyers can get with a conventional, Fannie Mae- or Freddie Mac-backed mortgage, are increasing significantly in the new year.

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In the majority of markets, that means a limit of $647,200 on a single-family home, up from $548,250. In higher-cost areas like Los Angeles or Honolulu, for example, it reaches $970,800, up from $822,375 this year. (Use this map to find the limits in your area.)

“Increased conforming loan limits give borrowers more buying power,” says Phil Shoemaker, president of originations at Homepoint. “They’re now able to get higher financing for loans through Fannie Mae and Freddie Mac, which come with lower interest rates than the alternative option of jumbo loans through private lenders.”

Jumbo loans are mortgages that go beyond the conforming loan limits. These come with stricter qualifying standards and higher interest rates.

Though the FHFA updates the conforming loan limits on a county-by-county basis annually, according to Robert Heck, vice president of mortgage at Morty, increases have historically been 10% or less. This year’s increase tops 18%.

“The limits typically increase each year based on changes in housing prices across the country,” Heck says. “This year’s increase reflects the speed at which housing prices have risen.”

The latest FHFA data shows home prices were up 18.5% between the third quarter of 2020 and the third quarter of 2021. Prices rose the most in the West, with Idaho, Utah, Arizona and Montana leading the pack. In Idaho, prices soared nearly 36% over the last year.

By most accounts, home prices will continue to rise in 2022, though at a slower speed than seen this year. Freddie Mac predicts prices will rise 7% next year, while property data firm CoreLogic expects a much smaller 2% uptick.

Fortunately, the increase in loan limits should give buyers more options when dealing with those rising prices — however large (or small) they may be.

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