By Doug Goelz, Mortgage Services
Every year, the Federal Housing Finance Agency determines conforming loan limits for the following year. Counties that are designated “high cost,” including all the Bay Area counties, have loan limits that are higher than in less expensive parts of the county. All the Bay Area counties have the highest conforming loan limits allowed in the country. Loans greater than the conforming limits are considered jumbo loans.
The recently announced conforming loan limits for 2022 are:
- For single unit properties (single family houses or condominiums) $ 970,800
- 2-unit residential properties $1,243,050
- 3-unit residential properties $1,502,475
- 4-unit residential properties $1,867,275
There are many financial, regulatory, and political factors associated with these limits, but how do higher conforming limits benefit borrowers? Here are 4 ways:
- Standardized Guidelines For conforming loans, almost all lenders follow the same Fannie Mae and Freddie Mac standardized guidelines, and there is software that can provide an approval upfront so that borrowers can be more confident in getting their loan.*
- Attractive Rates Because most mortgage lenders offer conforming loans, the conforming loan lenders compete for customers by offering attractive rates.
- Appraisal Waivers Conforming loans do not always require an appraisal (even with some purchases). With an appraisal waiver, borrowers save the cost of the appraisal and the financing process goes faster.
- Simpler Financing With the higher limits, some borrowers will find that their current financing that is split into a 1st and 2nd loan can now be refinanced into a single loan at a fixed lower overall interest rate. Buyers may find that they don’t need a jumbo loan, or a 1st and 2nd combination of loans, to finance their new property.
With the new loan limits, more people in our market can obtain the financing they need without a jumbo loan. There is nothing wrong with jumbo loans, and they may have attractive rates, but the requirements for jumbo loans can be more stringent than for conforming loans (for example, a larger down payment or more income may be required). Plus, jumbo guidelines can differ from jumbo lender to jumbo lender. In addition, the underwriting for jumbo loans can be more of a “black box” than with conforming loans, so borrowers with more complex finances may be less certain upfront about their jumbo loan being approved. An appraisal, and sometimes two, always are required for a jumbo loan.
Do the new higher loan limits open up possibilities for your financing? Feel free to contact me at 415‐730‐4665 or [email protected] with any questions and to discuss your options.
*Nothing is guaranteed with the automated approval of a conforming loan, though; the software may approve a loan, but the human underwriter still has to review all the facts and documentation before a loan gets final approval.
