Buying a Home May Get Easier for Some As FHFA Raises Loan Limits for 2022

Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the feelings of security and stability and the financial benefits that come with rising home equity. At the same time, many current homeowners have decided their house no longer meets their needs, so they moved into homes with more space inside and out, including a home office for remote work.

However, not every purchaser has been able to fulfill their desire for a new home. Here are two obstacles some homebuyers are facing:

  • The ability to save for a down payment
  • The ability to qualify for a mortgage at the current lending standards

This past week, both of those challenges have been mitigated to some degree for many purchasers. The FHFA (which handles mortgages by Freddie MacFannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit.

What Is the Difference Between a Conforming Loan and a Non-Conforming Loan when it comes to home buying?

Investopedia explains the difference in a recent post:

“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”

What Difference Does It Make to Me as a Home Buyer?

Forbes article earlier this year explains the benefits of a conforming loan and why they exist:

“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender.

Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”

What Happened Last Week?

The FHFA has significantly increased its Conforming Loan Limits for 2022. Sandra L. Thompson, FHFA Acting Director, explains in the press release that:

“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. countie​s will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”

This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year.

The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers. As the Forbes article explains:

“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”

Bottom Line

The fact still remains that many have faced challenges in the Orlando market with FHA loans. This is due to the fact that sellers with multiple offers have had their pick of which buyer’s financing out of the offers presented will allow them to sell the home easiest. Nonetheless, there are still homes out there you can score with an FHA loan. With the increase in loan limits, this means a wider variety of homes will become an option. This gives an option for those with poor to little credit history to secure financing without the need for high down payments. Raising the loan limits means better opportunities for many people who go this route.

Resources: Keeping Current Matters

  1. To get more information on the new FHFA Conforming Loan Limits, click here.
  2. To get more information on the new FHA Conforming Loan Limits, click here.

Join in the conversation

Florida has a a lot of great builders and new developments to chose from. To take part in the conversations on Moving to Orlando, residing in Florida, and living near Disney, join our Moving to Orlando Facebook group. In addition, stay tuned to MovingtoOrlando.com to stay up to date on what’s going on in Central Florida.

If you are interested in getting started on your Florida home purchase, our expert Moving to Orlando REALTORS are here to help you navigate the market. Take a moment to fill out our contact form or contact me directly at Ruben@MovingtoOrlando.com.

Amy Krieger

Amy loves all things Disney from the theme parks and resorts to the beloved films. She and her husband, Paul, are originally from Wheeling, West Virginia. They now live in Central Florida with their two fur-kids, Odie the greyhound and Hermes the Spanish galgo. As Disney Vacation Club members and Disney World Annual Passholders, they visit Disney World and other Disney properties as often as possible. Amy is a contributing writer for movingtoorlando.com, wdwinfo.com, dvcfan.com, and dclfan.com. She is also a loan originator for Monera Financial, a World of DVC company.

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