What could conforming loan limits mean to your mortgage?

How much are the conforming loan limits per state?  

The Federal Housing Finance Agency’s 2022 conforming loan limits increase to $647,200 in most regions in the US is an increase of 18%—the biggest year-over-year loan limit leap in recent memory. If you are a transferee hoping to relocate, and you need some added purchasing power, this news will likely be highly beneficial.

To track disparities in housing affordability and estimate mortgage defaults region by region, the FHFA has identified high-cost areas where loan limits have risen to accommodate the exorbitant cost of real estate. In any identified high-cost areas, the median home value is more than the baseline conforming loan limit. The precise conforming loan limit can be as high as 150% of the baseline conforming loan limit, depending on the median home value in the area.

For comparison, here are conforming loan limits from major centres in four different states. In Detroit, Michigan, the conforming loan limit sits at $647,200. The conforming loan limit rises to $694,600 in Nashville, Tennessee. In San Diego, California, meanwhile, the conforming loan limit is $897,750 and in Jersey City, New Jersey, the loan limit is as much higher at $970,800.

Special consideration is also given to the non-contiguous states and territories such as Hawaii, Alaska, the US Virgin Islands, and Guam, where in 2022 the FHFA’s conforming loan limit sits at $970,800.

Conforming loans vs jumbo loans

A jumbo loan may be a good option if you want to borrow more than FHFA has allowed in 2022. Simply put, jumbo loans are mortgages for anyone requiring a larger loan than the FHFA usually allows, and, compared to conforming loans, normally have higher interest rates and stricter requirements. And because jumbo loans carry a higher risk for lenders, companies make qualifying more difficult to lessen the likelihood that a borrower will default on any payments.