FHA loan limits increase in 2022
Interested in an FHA Loan? Here’s what you need to know about next year’s limits.
It’s no secret that house prices have skyrocketed. We can thank the limited supply and the high demand of buyers for this.
It’s no surprise that compliant loan limits will increase in 2022 to account for today’s higher real estate values. The FHA loan limits will also increase.
FHA loans are a great option for borrowers who want to buy a home but have limited funds to put into closing. These mortgages allow borrowers to deposit as little as 3.5%, and they also come with lower credit score requirements than conventional loans.
Right now, the FHA loan limits in most countries are $ 356,360. In high cost areas, the limit is $ 822,375. And in Alaska, Hawaii, Guam, and the US Virgin Islands, the limit is $ 1,233,550. All of these figures apply to single-family properties.
In 2022, the FHA loan limits will increase to the following levels:
- $ 420,680 for most of the country
- $ 970,800 for high cost areas
- $ 1,456,200 for Alaska, Hawaii, Guam and the US Virgin Islands
Again, these limits apply to single family homes. It is possible to take out an FHA loan for a multi-unit home, and these limits are higher. Individual buyers typically look to single-family homes when applying for a mortgage, while those buying property as an investment may be interested in multi-unit homes. To be clear, you can only take out an FHA loan for a home that you intend to occupy on your own. But you can buy a multi-unit house, occupy one unit, and rent the rest.
Do you need to take out an FHA loan?
The advantage of getting an FHA loan is that you don’t need to bring a large down payment to the table. With house prices so high these days, it can be difficult to get 10% or more, which many conventional lenders need. An FHA loan offers more flexibility.
Also, to get a conventional mortgage you need a minimum credit score of 620. But you can take out an FHA loan with a score as low as 500 if you are able to make a 10% down payment. For a lower down payment, you will need a minimum credit score of 580.
That said, there is a downside to borrowing through an FHA loan. These mortgages charge an initial premium of 1.75% of your loan amount. They also charge outstanding mortgage insurance premiums of 0.45% to 1.05%, which requires you to pay additional fees.
Plus, FHA loans require you to live in the house you are borrowing the money for. If your goal is to buy investment property that you do not occupy, then you will need to find another way to finance it.
Do your research
It makes sense that FHA loan limits will increase in 2022 as home values increase. If you are looking to buy a home in the coming year, it helps to see if an FHA loan is right for you. You may find that it is easier for you to qualify for an FHA loan than a conventional loan, and the aforementioned limits make buying a home in your target area more than possible.
If you are hoping to get an FHA loan, shop around with the different FHA lenders to see the rates they offer. Although the FHA loan limits are universal, each lender sets their own rates, so it pays to do your research before going ahead.