11 Feb 2022 Loan Limit Increase
Eric: Hey everyone. Eric Bibel with the Bibel team at NEO Home Loans, and today I wanted to talk to you about the 2022 loan limit increase.
So, 2022, crazy to think that it’s already here. How time has flown. But more importantly, what 2022 has brought us is an increase in conforming loan limits. Why that’s important and why I wanted to share. So, conforming loan limits is the national loan amount that dictates conventional financing. Outside of convent financing, if you are not in what’s considered a high cost territory, jumbo financing takes over. So, why that’s important to make a distinction between conventional and jumbo financing is really two prong. One, inside jumbo financing down payment requirements become more strict. And two, credit and overall qualifications is really a more stringent approach. So as we saw a significant increase in home values, loan limits had to chase behind that. And then we saw that ramp up significantly, almost a 19% improvement in year over year pricing inside the conventional loan space.
As of January 1st, 2022, the conforming loan limit nationally goes to $647, 200. Very random number, I know. But it becomes very, very meaningful in that now, as a first time home buyer, the opportunity to purchase a home approximately $666,000 with 3% down is now a reality. So markets like Riverside county, other pockets of Phoenix, parts of other parts of Arizona, Nevada, as we saw values spike into 2021, many borrowers had to look at jumbo financing options, which at best 10% down becomes a requirement. But more importantly, the qualifications within that down payment constriction was arduous. Really in depth, you needed to have multiple assets on hand post closing. The credit requirements were incredibly strict. Income documentation became very, very strict as well.
Getting into the expansion and loan limits, and opening up the ability to evaluate it from a conventional standpoint, really just serves so many more people at such a higher level. Also, in that loan limit national increase, we saw counties that are identified as really high cost territory, San Diego being one of them, we saw a significant ramp up in 2021’s numbers to 2022’s. So, in San Diego county, we saw that number raised to $879,750, which in this scenario, a 5% down payment, you could purchase upwards of $926,000, which is just my mind blowing. The ability to move away from jumbo financing, and we love jumbo financing, but it is not for everyone. There is a tremendous amount of restriction within the credit requirements, within income documentation, and post-closing reserves. So, the money outside your down payment requirement, and more importantly, the down payment requirements.
Seeing this significant change and increase in both the national and county specific loan limit has just opened up so many options for perspective home buyers as we enter the new year. And looking at forecasts into the new year 2022 is expected to be one of the most prosperous purchase markets we’ve seen in years past. If you would like more information on anything we’ve discussed here, my team, and I would love the opportunity to serve you. Please feel free to reach out at your convenience. Thank you.