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What are ‘Conforming Loan Limits’ and Why Do They Matter?

Dec 8 2021

You may have seen the news that the conforming loan limits will rise significantly in 2022.

The limits are reassessed around this time every year, but the big deal right now is that, for the first time ever, they will reach nearly $1,000,000 in some areas of the country.

What is a conforming loan limit?

Lenders, like banks and credit unions, lend out mortgages typically with the assurance that they’ll be able to make their money back by selling the mortgages to Fannie Mae, Freddie Mac, or Ginnie Mae.

Conforming loan limits, which are regulated by the federal government, set the amount of money that Fannie, Freddie, and Ginnie can spend on each mortgage.

(Our thorough breakdown of where mortgages come from, from your lender up to the federal government, explains all of this in simple but thorough language.)

Mortgages that cost more than the conforming loan limits are called jumbo loans and typically come with fewer options and places to borrow them from.

What are the conforming loan limits right now?

As of 2022, the new limits will be $647,200 for a single-family home in most places and $970,800 in high-cost regions, like New York City and much of the state of California.

The previous limit for single-family homes in most places was $548,250, but since home prices rose so much during the pandemic, that limit is no longer high enough to cover the cost of homes in most places.

In other words, homebuyers who were limited to $548,250 for a conventional mortgage will now have the option to borrow up to $647,200.

There will also be some limits for even more specific areas, like $747,500 in Boulder County, Colorado.

Why do conforming loan limits matter?

If you’re wondering how the higher loan limits will affect you, unless you’re shopping for homes that cost more than $548,250, the answer is that they won’t.

However, understanding concepts like conforming loan limits can make you a more informed homebuyer and homeowner, which is always helpful in the long run.

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