FHA Loan Limits for 2022 Will Likely Be Increased, Due to Price Growth

Update: It’s official. The FHA loan limits for 2022 went up. Details here

Another year, another increase for FHA loan limits. That’s what we expect to happen, anyway. While nothing is official yet, it’s highly likely (and almost certain) that the FHA loan limits for 2022 will be increased over their current levels.

The main reason? Significant home-price growth nationwide.

Home values in most U.S. cities have skyrocketed over the past year or so. And when that kind of thing happens, federal housing officials usually increase loan limits in order to “keep up.”

As the Home Buying Institute recently reported, the Federal Housing Finance Agency has already signaled that they’ll be increasing the size limits for conforming mortgage loans in 2022. And whenever the conforming caps go up from one year to the next, the Federal Housing Administration usually follows suit by increasing the FHA loan limits.

We’ll know more during the first week of December 2022. That’s when we expect to have an official announcement from HUD and/or the Federal Housing Administration.

Higher FHA Loan Limits in 2022

Many home buyers use the FHA loan program to finance their purchases. This program allows borrowers to make a down payment as low as 3.5% of the purchase price or appraised home value.

Also, borrowers tend to have an easier time qualifying for FHA loans, when compared to a “regular” conventional mortgage. That’s because the federal government insures these loans, giving lenders and added layer of protection from borrower default.

But there are limits to how much you can borrow when using the Federal Housing Administration’s home loan program. These caps are commonly referred to as “FHA loan limits.”

The maximum borrowing amounts vary by county, because they’re based on home prices. Counties with higher median home values tend to have higher FHA loan limits, while more affordable markets have lower caps. In 2021, they range from $356,362 to $822,375, depending on the county where the property is located

HUD officials review these limits each year and, when warranted, increase them from one year to the next. FHA loan limits are basically “tied” to the conforming limits used for regular non-government-insured mortgage. So when the conforming caps go up from one year to the next, the FHA loan limits tend to rise as well.

Official Announcement Expected in Early December

Which brings us back to the point of this report. We expect HUD to increase the FHA loan limits for 2022 in response to significant home-price gains that have occurred over the past year.

The announcement for conforming loan limit revisions usually comes during the week of Thanksgiving. The FHA announcement typically follows about 7 to 10 days later.

For the past few years, HUD has announced changes (and increases) to FHA loan limits during the first week of December. That’s what we expect to happen this year, as well.

As always, we’ll keep you posted. We will provide an update to this page, along with a new report, once the official announcement comes out. So be sure to check back during the first week of December, for the latest info.

What All of This Means for Home Buyers

To recap: We expect the FHA loan limits for 2022 to go up, due to steady home-price appreciation during 2021.

But how would that affect the home buyers and borrowers who use the FHA program?

Basically, this kind of increase would give borrowers a higher range of financing to work with. It would make it easier to find a suitable home to purchase, while staying within the FHA loan limits. So in that regard, it would be a positive development from a home buyer’s perspective.

When you use an FHA-insured mortgage to buy a house, the amount you can borrow from the lender must fall within the loan limits for your county. If you want to buy a home that’s priced above the official FHA limits, you would have to pay the difference out of pocket. That means putting more money down.

That’s why an increase for 2022 would be good news for borrowers. It would give you a higher maximum mortgage size to work with.

Of course, not all borrowers qualify for the maximum FHA loan limit amount. You must have sufficient income to handle your monthly mortgage payments, along with all other recurring debts. This is true for all mortgage types.

Another way to think of it: The FHA loan limits for 2022 will apply to all borrowers. But not all borrowers will be able to borrow that much.

Aside from a likely increase in the maximum mortgage amounts, we do not anticipate major changes for FHA requirements in 2022. The minimum requirements for credit scores, down payments, mortgage insurance, and other aspects of the program will likely remain the same as they are now. At least into the first part of the year.