Blog Post

If you’re one of the many homebuyers who have been frustrated with the way rising home costs have hindered your new home search, there’s good news. Higher 2022 conforming loan limits help homebuyers get affordable home financing that keeps up with the latest housing prices.

What are conforming loan limits?

The Federal Housing Finance Agency sets the limits for conforming loans. As of January 1, 2022, that limit increased 18.05%, equal to the percentage that the median home prices went up in the 12 months between the third quarter of 2020 and the third quarter of 2021. That figure sets the standard for conforming loan limits every year.

Here in Montgomery County, the increase brought the “ceiling” for a conforming loan to $970,800, up from $822,375 in 2021 for a single-family residence. This amount is also available in areas where home prices are higher than other parts of the country. Washington, DC, Boston, New York, Los Angeles, San Francisco, Seattle, and Denver are some of the metros where higher home prices command higher loan limits. 

Why does this increased loan limit matter?

Over the past year, with the price of homes rising, buyers were often faced with a difficult choice. The higher prices sometimes pushed them out of their mortgage approval zone. They either had to settle for buying a lesser home or put their plans on hold while they saved more money to qualify for a larger loan (conventional or jumbo loan). But while they kept saving money, the home prices kept rising.

The price of the home and the amount you plan to finance can determine the type of mortgage you get. If you’re planning to buy a home that exceeds the conforming loan limit, you’ll have to look at a conventional loan that falls under the “jumbo” criteria.

A jumbo loan can be more difficult to acquire. Lenders might consider it riskier to loan the higher amount so the criteria for approval is tighter. With the limit stretched higher, homebuyers have more room to buy a home without moving to a jumbo loan.

What’s the difference between a conforming home loan and a conventional loan?

We know that all this mortgage jargon can be confusing, so let’s see if we can clear it up.

• A conforming loan meets the criteria set by Freddie Mac and Fannie Mae, two agencies associated with the government that insure certain loans. This mortgage is not necessarily an FHA loan; those loan programs have their own, very specific underwriting qualifications. A conforming loan is one that simply meets the loan limits and other qualifications, like credit score, debt-to-income rate, down payment, and loan-to-value ratio.
• A conventional loan is not guaranteed by the government, but by private lenders. It often has a higher interest rate because it doesn’t have that backing and is therefore considered to be a higher risk.
• A jumbo loan exceeds the limits of a conforming loan. This year, that means the loan amount is greater than $970,800. As you can imagine, jumbo loan requirements are much more stringent. For example, while a conforming loan might only require a 620 credit score, a jumbo loan can require a credit score of at least 700.

“We know that buying a new home has been a challenge since 2020,” says Tom Kettler, Vice President of Kettler Forlines Homes. “These higher conforming loan limits are definitely going to help some people get the home they’ve been wanting.” 

Kettler Forlines Homes is building new homes for sale on large lots at The Reserve at Brightwell Crossing in Poolesville, MD, where only a few homesites remain. We also offer “build on your lot” construction, with a large portfolio of home designs. Choose from single-level multi-story floor plans with 2,500 to more than 7,200 square feet of indoor living space. We offer many ways to customize the homes, so talk to us about your plans for building your home, your way!