Over the years, FHA and GSE loans have opened the doors for hundreds of thousands of Americans to obtain ownership of a new home. Due to their low down payment requirements, acceptance of less than perfect credit and fairly low interest rates, these home loans continue to remain popular going into 2022.
However, it's important to note that new loan limits have been created for 2022.
What You Need to Know About 2022 Fha and Gse Loan Limits
A Quick Background on FHA Loans
FHA stands for the Federal Housing Administration. GSE stands for Government-Sponsored Enterprise. By default, FHA home loans fall into the category of GSE loans. These home mortgages are constructed to help lower-credit home buyers and those with low income the ability to purchase a home.
Compared to traditional conforming mortgage loans, FHA home loans offer looser eligibility standards. Those with a credit score as low as 580 can get approved for an FHA mortgage. Many will be required to bring a down payment as low as 3.5% to the closing table. Compare that to the traditional 20% down payment required by conforming loan lenders, and it becomes overly clear just how beneficial FHA loans can be to the average joe.
New FHA Loan Limits
Rewind to 2021, and loan limits were situated at $356,360 for a single-family home. Homebuyers saw home prices drastically increase over 2021, which has driven up more demand and competition for lower-priced homes that fit within the FHA loan limitations.
However, the Federal Housing Administration has assessed the house value increase and has increased their lending amounts accordingly. Now, those who are eligible for an FHA mortgage may opt for a single-family home up to $420,680. That's $65,000 over the 2021 FHA maximum loan limit.
A Note on Eligibility
It's highly recommended that you opt for a professional mortgage broker, such as the McLellan Team in Irvine, CA, to assist you in determining your maximum loan amount. While the FHA sets their maximum amount at $420,680 for a single-family home, that doesn't mean that you will necessarily qualify for the full amount.
The Federal Housing Administration considers many other factors when determining how much a single customer can borrow. These other factors include the borrower's credit score, down payment amount and debt-to-income ratio.
When you apply for an FHA mortgage, you must meet some minimum eligibility requirements. These include having a credit score of at least 580 and a stable income with two years of solid employment history.
The FHA will need to see a debt-to-income ratio of 45% or less to approve you for a home loan. They will also require that you bring at least 3.5% of the purchase price to the closing table as your down payment. In some cases, they may require you to bring more.
More Expensive Metro Areas
The FHA loan limit that we've discussed so far is available for areas of the country considered to be low-cost areas. There are four main categories that FHA mortgages can fall into, each with its own maximum loan amount. These categories include:
• Low-cost area: $420,680
• Mid-range area: $420,681 to $970,799
• High-cost area: $970,800
• AK, Guam, HI, & Virgin Islands: $1,456,200
To determine what category your area falls under, you'll want to identify the median home price in that area. Then, multiply the median home price by 115%. If your result is under $420,680, then the area is considered to fall into the low-cost loan range. Conversely, if the amount is greater than $420,680, it's considered to be in a high-cost loan area.
After reviewing the figures above, many people are surprised to discover such a high loan amount for a single-family home in Alaska, Guam, Hawaii, and the Virgin Islands. The Federal Housing Administration sets higher loan limits in these areas to help cover the higher cost of home construction.
Multifamily Loan Limits
You may also be eligible for purchasing a multi-unit property with an FHA loan. These Government Supported Enterprise loans are eligible for two to four-unit properties. They all naturally have a higher maximum loan amount than the single-family residence limits that we discussed above.
It's crucial to note that you must use the multi-family property as your primary residence. You can't use an FHA or GSE loan to fund the purchase of a property that you don't plan on living in. When looking at the maximum borrowing limits for multi-family properties, they are subdivided into the four areas that we went over above.
Two-Unit Property
• Low-cost area: $538,650
• Mid-range area: $538,651 to $1,243,049
• High-cost area: $1,243,050
• AK, Guam, HI, & Virgin Islands: $1,864,575
Three-Unit Property
• Low-cost area: $651,050
• Mid-range area: $651,051 to $1,502,474
• High-cost area: $809,151 to $1,867,274
• AK, Guam, HI, & Virgin Islands: $2,253,700
Four-Unit Property
• Low-cost area: $809,150
• Mid-range area: $1,502,475
• High-cost area: $1,867,275
• AK, Guam, HI, & Virgin Islands: $2,800,900
The Federal Housing Administration takes care of establishing the different pricing tiers for each county of every state throughout the country. You can utilize this tool to determine what the range is for your specific area.
A Note on GSE Conforming Loan Limits
Apart from FHA loans, common GSE conforming loans are issued by Freddie Mac and Fannie Mae. These two privately held agencies offer home loans to citizens with the guarantee of government backing in the event of default. These loans are typically given to single-family homes. In 2021, the loan limit was $548,250 throughout most of the country. As we turn into 2022, the GSE loan limit has increased 18.5% to a total of $647,200 per single-family property.
If you would like to take advantage of the new FHA and GSE loan limits, contact the McLellan Team today to get the professional mortgage assistance that you need.