The new metro Denver conforming loan limit for 2022 is $684,250. It used to be $596,850, a jump of $87,400. Many counties conforming loan limits for Fannie Mae and Freddie Mac will rise to $647,200 in 2022, a jump of nearly $100,000 from 2021’s previous record high.
What is a conforming loan limit?
The conforming loan limit is the annually adjusted dollar cap on the size of a mortgage that the Federal National Mortgage Association (known colloquially as Fannie Mae) and the Federal Home Loan Mortgage Corp. (aka Freddie Mac) will purchase or guarantee.
A conforming loan meets the guidelines to be sold to either Fannie Mae or Freddie Mac, two of the largest mortgage buyers in the U.S. Non-conforming loans, on the other hand, are those that fall outside those guidelines, so they can’t be sold to Fannie Mae or Freddie Mac.
Conforming lenders underwrite and fund the loans and then sell them to investors like Fannie Mae and Freddie Mac. Then the loans are sold to investors on the open markets. Because of their liquidity and the government regulations, conforming loans often have lower interest rates than non-conforming loans.
Why does the conforming loan limit matter?
If you are not getting a conforming loan, you are left with a jumbo, high balance, or non-conforming loan. Downpayment requirements are higher on jumbo, high balance, and non-conforming loans, making them less attractive to some borrowers. Interest rates are also, usually higher on these loan types. Increasing the conforming loan limit increases the amount a borrower can borrower with a lower interest rate and a lower down payment.
What does the conforming loan limit mean for the purchase price?
With a conforming loan limit of $684,250, a first-time homebuyer only putting down 3% could purchase a home costing $705,412. Or if a buyer is wanting to put the minimum down to avoid mortgage insurance, 20%, they could purchase a home up to $855,312.
The conforming loan limit will rise in all but four U.S. counties. For most of the U.S., the 2022 conforming loan limit for one-unit properties will be $647,200, an increase of $98,950 18.5% from 2021. While 95% of U.S. counties will be subject to the new baseline limit of $647,200, nearly 100 counties will have conforming loan limits approaching $1 million.
Federal Housing Finance Agency (FHFA) is actively evaluating the relationship between house price growth and conforming loan limits, particularly as they relate to creating affordable and sustainable homeownership opportunities across all communities.
Over the last 18 months, housing prices have significantly increased due to record low inventory levels amidst strong demand. The higher loan limits reflect this dynamic.
For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the applicable loan limit will be higher than the baseline loan limit.
The Housing and Economic Recovery Act (HERA) establishes the high-cost area limit in those areas as a multiple of the area median home value while setting a “ceiling” at 150% of the baseline limit. Median home values generally increased in high-cost areas in 2021, which increased their conforming loan limit. The new ceiling loan limit for one-unit properties will be $970,800, which is 150% of $647,200.
HERA requires that the baseline conforming loan limit for the Enterprises be adjusted each year to reflect the change in the average U.S. home price. Also on Tuesday, FHFA published its third-quarter House Price Index report, which includes statistics for the increase in the average U.S. home value over the past four quarters. According to the nominal, seasonally adjusted, expanded-data FHFA HPI, house prices increased by 18.05%, on average, between the third quarters of 2020 and 2021, thus establishing the baseline conforming loan limit for 2022 will increase by the same percentage.
As home prices continue their record-breaking climb, the Federal Housing Finance Agency said Tuesday that loan limits for mortgages that can be bought by Fannie Mae and Freddie Mac in 2022 will rise by the largest percentage ever. For much of the United States, the divide between conforming loans and jumbo mortgages will be $647,200. That’s an 18% increase from this year’s limit of $548,250.
In pricey housing markets — including much of California, all of New York City, the District of Columbia, and the entire states of Alaska and Hawaii — the new limit is $970,800, up from $822,375 in 2021.
And some markets fall in between. In Colorado’s Boulder County, the new limit for conforming loans is $747,500. In Florida’s Monroe County, home to the Keys, the limit is $710,700. In the Nashville metro area, it’s $694,600.
The FHFA, which oversees Fannie Mae and Freddie Mac, said the increase was based on its House Price Index for the third quarter. Since the coronavirus recession began this spring, the housing market has been on fire — inventories are tight, buyer demand is strong and mortgage rates have fallen to record lows.
The agency said Tuesday that U.S. house prices rose 18.5% from the third quarter of 2020 to the third quarter of 2021, the fastest appreciation on record. Idaho led the way with a 35.8% jump in prices, followed by Utah’s 30.3% spike.
Conforming Loan Limit for Other Front-Range Counties
Here is the new 2022 conforming loan limit for these Denver-metro and front range counties in Colorado:
- Adams County – $684,250
- Arapahoe County – $684,250
- Boulder County – $747,500
- Broomfield – $684,250
- Douglas County – $684,250
- El Paso County – $647,200
- Jefferson County – $684,250
- Larimer County – $647,200
Click here to see the full list of the Colorado counties new 2022 conforming loan limit