New FHA loan limits expand homebuying opportunities

We’re barely into 2022 and there’s already good news for homebuyers! The Federal Housing Administration announced that they have significantly  increased the limits for their government-insured home loans. These new FHA loan limits expand the homebuying opportunities for people who need these low-down payment mortgage programs to make it possible to buy a new home. 

The new home loan limits range from $420,680 to $970,680. The amount you can borrow with an FHA home loan will depend on the area where you’re buying. In most of the country, the conforming loan limit will be $647,200. More expensive housing markets—like Washington, DC, Boston, Los Angeles, New York, Denver, San Francisco, and Seattle—qualify for the higher limits. 

The 18.05% increase accommodates the rise in home prices that occurred over the past year. The FHA sets its limits based on median home prices. Between the third quarter of 2020 and the same time in 2021, median home prices nationwide increased 18.05%, which set the new limit for 2022.

“The 2022 FHA loan limits for 2022 will help more buyers—particularly first-time homebuyers— qualify to purchase the home they want with affordable financing,” explains Tim Lantz, Baker Residential’s Vice President of Sales and Marketing. “Home prices went up in the past two years because of so many circumstances beyond our control. We’re already hearing from buyers who are excited to have more borrowing power.”

What does the new FHA loan limit mean for homebuyers?

The FHA home loan was established by the government to help first-time and moderate-income buyers to access affordable financing. The program requires a minimum down payment of 3.5% for buyers with a credit score of at least 580. But if your score doesn’t quite reach this point, the program is still available. You may qualify for an FHA home loan with a credit score between 500 and 579, but will need a minimum 10% down payment.

Prior to 2020, many first-time homebuyers had been saving up for the down payment on a home and felt ready to launch into buying mode. When home prices unexpectedly went up, they had to choose between buying a lesser home than they had planned or waiting to save up more money. Meanwhile, housing prices continued to increase. Now, these buyers have more purchasing power because the FHA loan limits have adjusted to the 2022 prices.

Baker Residential is currently building a variety of homes—from our Raleigh townhome community of The Parc at Edwards Mill to single-family homes for sale at Starling Woods in Durham and at LakeStone in Wake Forest. Contact us to learn more about these new construction homes and we can also put you in touch with an FHA-approved lender to get mortgage pre-approval!