Home buyers with variable income often wonder if they can qualify for a mortgage loan…
California Loan Limits Expected to Rise in 2022, Due to Price Growth
Update, November 30: It’s official. California conforming loan limits have been increased for 2022, and by a lot. Here’s an updated blog post with the revised figures for all counties.
California loan limits are expected to rise in 2022, in response to tremendous home-price growth during the 2021 calendar year. This would give borrowers a higher financing range, without venturing into jumbo mortgage territory.
We expect the official government announcements to come in late November (for conforming loans) and early December (for the FHA program). And as always, we’ll keep you posted with a series of blog posts covering any changes that take place.
Home Prices Keep Rising in California
Home prices in California continue to climb at a steady pace. This is largely due to an ongoing imbalance between supply and demand. Plenty of buyers seeking properties … not enough homes to go around.
According to the latest data from Zillow, the median house value for the Golden State rose by nearly 22% over the past year. That’s miles above the historical yearly average for the past 20 years.
Forecasters predict that home-price growth in California and nationwide will slow down in 2022, compared to this year’s gains. And that would be a positive trend from an overall housing and economic standpoint.
Twenty percent price growth in a single year is highly abnormal, historically speaking. A slowdown in home-value appreciation could ease affordability issues and help shield the market from a major downturn. It would bring us one step closer to something resembling normal.
As Chris Glynn, an economist for Zillow, recently told Fortune: “Home price appreciation is difficult to forecast, but we expect home price growth to slow down from historic highs.”
Glynn was speaking about the nation as a whole. Similar forecasts specific to California have also suggested that house values will cool down a bit in 2022. Even so, the Golden State will likely outpace the national average next year, in terms of price growth.
Loan Limits Expected to Rise for 2022
In response to the rapid rise of house values, California loan limits for 2022 are expected to go up as well.
Federal housing officials review these limits every year, in relation to house values. When home prices climb considerably during the course of a calendar year, housing officials typically increase the loan limits to keep up.
To be clear, a “loan limit” does not necessarily represent the maximum amount you’re able to borrow. It’s just the most you can borrow under certain conditions and when using a specific loan program.
The current conforming loan limit in California (for conventional mortgages) ranges from $548,250 to $822,375, depending on the county. Here in the Bay Area, it’s currently set at $822,375. A home buyer in the Bay Area could borrow more than that, if their income supported it. But they would have to use a “jumbo” mortgage instead of a conforming loan.
Generally speaking, jumbo loans have stricter requirements due to the larger amount of money being borrowed.
The Federal Housing Administration has their own set of limits for FHA home loans, though they sometimes overlap with the conforming limits mentioned above. We expect the FHA caps to increase in 2022 as well, due to significant price growth.
The point is: these loan limits apply to most borrowers across California, but not all borrowers. Those will higher income levels can qualify for home loans well above $1 million, in some cases.
And given the home-price growth of the past 10 months or so, it’s hard to imagine a scenario where they wouldn’t increase the California loan limits for 2022.
We’ll Keep You Posted
The Federal Housing Finance Agency (FHFA) typically announces changes to California loan limits toward the end of November, for the year following. The Federal Housing Administration usually makes a similar announcement in early December, for the FHA loan limits. So we’ll learn more over the next five weeks or so.
As always, we’ll keep you posted. A lot of our blogging efforts toward the end of the year revolve around loan limit updates. We will be publishing a series of blog posts dedicated to this subject, to keep our readers informed.
In the meantime, just know there’s a strong chance California loan limits in 2022 will be increased in response to steady home-price growth.
Mortgage questions? Located in the Bay Area, Bridgepoint Funding serves the entire state of California with a broad range of financing options. Please contact us if you have questions about applying for a home loan, or if you’d like to get pre-approved.
