As expected, HUD, the parent of FHA, announced the FHA Loan Limits Increases for 2022, HUD announced the new FHA loan limit will be increased to $422,680 on single-family homes effective January 1st, 2022. Although the new maximum loan limit takes effect on January 1st, 2022, many mortgage companies such as Capital Lending Network, Inc. will have the new loan limit effective immediately. The announcement by HUD followed the news release by the Federal Finance Housing Agency (FHFA) the new conforming loan limit increase to $647,200  from $547,250.

HUD Increases FHA Loan Limits For Six Years In A Row Due To Rising Home Prices

Both HUD and the FHFA increased FHA and Conforming loan limits due to the skyrocketing home prices. Many homebuyers were priced out of the housing market due to the rising home prices in the past seven years. HUD and the FHFA have now increased FHA and Conforming loan limits for the past five years due to skyrocketing home values throughout the nation.

With the increase of the FHA loan limit on single-family home financing, all other tiers of FHA loan limits including but not limited to high-balance FHA loans and multi-family home loans have increased as well. We will cover high-balance loan limits and multi-family home financing loan limit increases in later paragraphs.

FHA Loan Limits Increases To Help Homebuyers Qualify For FHA Loans During Hot Housing Markets

For the past seven years, home prices skyrocketed like never before. This sudden spike in home prices concerned government agencies as well as the two mortgage giants Fannie Mae and Freddie Mac. HUD, VA, USDA, Fannie Mae, and Freddie Mac were all concerned about the strong demand for homes and lack of inventory.

This surplus of more demand versus the supply of homes in the marketplace is what is driving home prices. A sudden spike in home prices will often lead to a housing correction. However, the housing market has not seen a correction for the past seven years. There has not been a housing market correction for over 10 years.

Housing Market Forecast For 2022

Most homeowners left with upside-down mortgages from the 2008 financial crisis and real estate crash are no longer in homes with mortgage loan balances higher than the value of their homes. A large percentage of homeowners who only put a 3.0% to 5.0% down payment on their home purchase just a few years ago is sitting on substantial equity.

With substantial equity in their homes, homeowners can get a cash-out to refinance mortgages at historically low mortgage rates. The housing market forecast for 2022 is expected to remain strong and many experts are predicting a stronger housing market than ever in history.

Non-QM Loans

With the combination of a faster-than-expected economic recovery from the coronavirus pandemic, historically low mortgage rates, and the re-emergence of dozens of non-QM and alternative financing mortgage programs, expect the housing market to be booming and prices keep on going up for a few years to come. The historic low mortgage rates are expected to remain low for the next 24 to 36 months.

2021 FHA Loan Limits Increases Announced From HUD To Meet Median Home Prices

For the last six years, the Federal Housing Finance Agency kept on increasing conforming loan limits due to skyrocketing housing prices. Many homebuyers were being priced out of buying a home due to skyrocketing home prices. After a few days after the FHFA announces the conforming loan limit increases for the following year, HUD announces the FHA loan limit increase as well. Just like clockwork, both HUD and the FHFA have been increasing FHA and Conforming loan limits for the past five years.

HUD And FHFA Increases FHA And Conforming Loan Limits For 2022

HUD announced the new FHA loan limits. HUD announced it would be increasing the FHA loan limits for 2022 will increase to $422,680 on all low-cost counties (often referred to as the floor since it is the low end of the loan limit). HUD will increase loan limits up to $970,800 in high-cost counties (often referred to as ceiling limits since it is the highest loan limit) on all FHA-insured mortgage loans on single-family home loans.

HUD And FHFA Increase Loan Limit To Avoid Homebuyers Being Priced Out Of The Housing Market

The increase by HUD is due to skyrocketing home prices. The new loan limit will become effective on January 1st, 2022. The 2022 FHA loan limit of $422,680 is an increase from the 2021 FHA loan limit of $356,362. In high-cost counties throughout the country, the FHA loan limit ceiling will increase up to a maximum of $970,800 (up from its current level of $822,375). These increased FHA loan limits will apply to FHA loans with an FHA case number assigned on or after January 1, 2022.

HUD Press Release On Increase Of FHA Loan Limits To $422,680

According to a breaking press release from HUD, it published the following statement with regard to the loan limit increase on FHA loans on December 2: The limits for next year are going up for most — but not all — counties across the U.S.  Due to robust increases in median housing prices and required changes to FHA’s floor and ceiling limits, which are tied to the Federal Housing Finance Agency (FHFA)’s increase in the conventional mortgage loan limit for 2022, the maximum loan limits for FHA forward mortgages will rise in 3,108 counties. In 125 counties, FHA’s loan limits will remain unchanged. In some counties, home prices did not rise enough in 2020 to justify having higher limits in 2022.

That accounts for the 125 unchanged counties mentioned in the quote above. But for most of the country, they’ll be going up to keep pace with home-price appreciation. The bottom line here is that homebuyers who want to use the Federal Housing Administration’s mortgage program in 2022  will have a higher financing range to work with. But it’s important to realize the FHA does not lend money directly to borrowers.

They insure loans that are made by “regular” banks and mortgage lenders operating within the private sector. So it’s up to the lender to determine how much a person can borrow when using the FHA loan program. HUD simply establishes a maximum borrowing amount, or limit, for all borrowers. FHA loan limits can vary from one county to the next, due to variations in home prices. But they are usually the same across an entire metro area. According to HUD, these limits are determined by using the county with the highest median price within the metropolitan statistical area.

The increase by HUD was less than expected and trails the conforming loan limit for 2022 capped at $647,200..

FHA Loan Limit By Property Type

The majority of counties in the United States are considered low-cost areas in regards to having median home prices. HUD allows one to four-unit owner-occupant properties eligible for FHA loans. The more units in a property, the higher the loan limit. Homebuyers can qualify to purchase two to four-unit multi-family homes with a 3.5% down payment FHA loan. This only holds true if the borrower lives in one of the properties as an owner-occupant homeowner. Owning a two to four-unit owner-occupant home with an FHA loan is normally a great investment.

The following are the maximum FHA loan limits based on the type of properties in low-cost areas:

• One-unit: 2022 FHA Loan Limits on single-family homes is now at $420,680 from the 2021 limit of $356,362
• Two-unit: 2022 FHA Loan Limits on two-unit homes is now at $538,650 from the 2021 limit of  $456,275: High-cost is capped at $$1,243,050
• Three-unit: The 2022 FHA loan limits for three-unit multi-family homes is now capped at $651,050 from the 2021 limit of $551,500: High-cost counties is capped at $$1,867,274
• Four-unit: The 2022 FHA loan limits on four-unit multi-family homes is now capped at $809,150  from the 2021 loan limit of $685,400: High-cost area is capped at $$2,800,900

FHA loan limits on one to four-unit homes are higher in high-cost areas. Many counties in the U.S. have high-cost counties. High-cost areas are counties where home prices are significantly higher than the median home prices in low-cost areas.

HUD Maximum Loan Limits On FHA Loans In High-Cost Counties

 

High-cost counties have median home prices that are significantly higher than the national average median home prices. For example, California, New Jersey, Colorado, Maryland, Virginia, Pennsylvania, Washington, D.C., and Connecticut have dozens of high-cost areas. Therefore, the FHA loan limits are higher in a high-cost area.

HUD set the 2021 FHA loan limits for these high-cost areas are as follows:

• One-unit: High-cost is capped at $970,800
• Two-unit: High cost is capped at $$1,243,050
• Three-unit: $1,867,274
• Four-unit: $$2,800,900

There are many areas throughout the United States where the median home prices fall somewhere between these low- and high-cost ranges, in terms of home prices. HUD realizes this and sets higher loan limits in low-cost areas and lower than the maximum ceiling loan limit in high-cost areas. Therefore, the FHA loan limits in these areas for 2021 will fall somewhere between the two ranges shown above.

NOTE: To find a complete list by county throughout the United States, along with a list of those counties where the limits will be going up for 2022, you can visit this page of the official HUD website.

The Federal Housing Finance Agency (FHFA) Increases Conforming Loan Limit To $647,200  And High-Balance Ceiling To $970,800 for 2021

As expected, the FHFA Increases Conforming Loan Limit To $657,200 for 2022 from $548,250. The increase in conforming loan limits for 2022 is the sixth increase the Federal Housing Finance Agency has increased the loan limit on conventional loans. The FHFA is the first agency that increases the loan limit. HUD, the parent of FHA, follows the FHFA’s lead. The housing market has been booming for the past several years with no slight sign of a housing correction.

The Housing Market Bullish Despite The Coronavirus Outbreak And Scare

When the coronavirus outbreak hit the nation this past February 2020, many economists and real estate experts forecasted a housing meltdown worse than the 2008 housing and mortgage crisis. Over 50 million Americans filed for unemployment due to the country being shut down due to the coronavirus pandemic. Unemployment rates reached close to 20%. Many experts and economists predicted unemployment rates will surpass the 35% mark and the U.S. economy will enter a worse recession than the 2008 financial crisis.

The Trump Administration’s quick economic stimulus package and President Trump’s being proactive in handling the economy stumped further economic corrosion from the COVID-19 doing more damage. Despite the gloomy forecast of economists, the housing market went the opposite direction. Instead of the housing market plummeting, housing prices started skyrocketing. Many pre-approved homebuyers put their plans on buying a home on hold hoping for a correction.

In this article, we will discuss and cover the hot housing market and fast coronavirus recovery and how it will affect home prices going into 2021.

Rising Home Prices

Skyrocketing home prices due to more demand for homes versus housing inventory have many homebuyers being priced out of the market. The FHFA’s 2021 conforming loan limit increase to $647,200 was almost a $100,000 increase from 2021’s $548,250.  The announcement of the FHFA’s increase of the conforming loan limit for 2022 to $647,250 was the fifth increase in the past five years from the Federal Housing Finance Agency.

The FHFA Increases Loan Limit On Conventional Loans Due To Skyrocketing Home Prices

The Federal Housing Finance Agency (FHFA) announced new conforming loan limits for Fannie Mae and Freddie Mac for 2022. As expected, the FHFA has increased the 2022 conforming loan limit to $647,200. This is a $100,000 increase from 2021’s limit of $548,250. This $100,000 increase in the conforming loan limit is the sixth consecutive year of increases from the FHFA.

This is historic for the FHFA to be increasing the conforming loan limits for five years in a row. Conforming loan limits remained the same for over 10 years until 2016. In 2016, the Federal Housing Finance Agency increased the conforming loan limit for the first time in 10 years. Since 2016, the conforming loan limit has increased by $131,250.

Booming Housing Market With No Correction In Sight

Many economists and housing experts are very concerned with the rapidly rising home prices. Due to the skyrocketing home prices nationwide, other government agencies have lowered the loan to value on cash-out refinances this year. HUD, the parent of FHA, has lowered the loan to value from 85% to 80% LTV on cash-out refinance FHA loans. The Veterans Administration has lowered the loan to value on cash-out refinance VA loans from 100% to 90% loan to value.

Skyrocketing Home Prices

Government mortgage insurance experts are afraid of the out-of-control skyrocketing home prices. This is the reason they are concerned about another housing boom and a potential housing market crash. With the Central Bank lowering the interest rate to zero percent, mortgage rates have plummeted to historic lows which fueled the already strong booming housing market.

Today’s 30-year fixed-rate mortgages are under 3.0%. Mortgage rates are expected to remain low for the next couple of years. Demand for homes remains stronger than ever. Demand far outpace the inventory of homes in the market.

Rising Home Prices

The Federal Housing Finance Agency (FHFA) has increased conforming loan limits for five years in a row. If the FHFA did not increase conforming loan limits, many homebuyers would be priced out of the market due to skyrocketing home prices. Home prices have hit a seven-year high recently. The increase of the conforming loan limit will no doubt help homebuyers who were priced out of the market due to the home values substantially higher than the maximum loan limit caps on conventional loans. High-balance conforming loan limits in high-cost counties have increased from the current $765,500 to $970,800 for 2022 on single-family homes. Two to four-unit multi-family homes have higher conforming loan limits than single-family homes.

Click here for a list of the maximum conforming loan limits for all counties in the United States

Summary And Recap

To summarize, the base loan limit on conventional loans will increase to $647,200 or 2022 from $548,250 on single-family homes for 2022. In high-cost counties, the high balance ceiling will increase to $870,800 from $822,375 on single-family homes.

Note: The new conforming loan limits for 2022 on conventional loans are effective immediately for many lenders. HUD has increased FHA loan limits to $420,680 on single-family homes. There are no maximum loan limits on FHA loans. Capital Lending Network, Inc. will announce breaking news on any news pertaining to the mortgage industry. Th increase of loan limits on FHA loans for 2022 is the sixth increase in a row.

Bright Housing Market Outlook With No Signs Of A Housing Correction

Home prices throughout the United States are skyrocketing. The future looks very bright for the housing market. HUD and the FHFA keep on increasing loan limits year after year to keep up with rising home values. Many analysts and economists were dead set wrong when they predicted a housing market crash when the coronavirus pandemic hit the nation in February 2020. The housing market has been stronger than ever during the entire shutdown of the coronavirus outbreak as well as the ongoing economic recovery from the pandemic. Average median home prices went up 12.6% over last year which makes the 14th consecutive week of double-digit price growth.

Demand For Homes Stronger With More Renters Buying Homes Fearing Mortgage Rates Spike

Nobody has a crystal ball and what the future will bring. However, today’s housing market remains strong, stable, and a great investment for the future. A housing correction is not always necessarily bad. It is healthy for the housing market and economy for a slight housing correction. However, from all the data and signs surrounding today’s real estate market, the housing market for 2022  remains stronger than ever. Expect home prices to keep on appreciating for the next two to five years.