Zillow: Compliant loan limits see record jump – what does this mean for home buyers who may need a jumbo loan?

posted on March 9, 2022

Compliant loan limits see record jump – what does this mean for home buyers who may need a jumbo loan?

Compliant lending limits saw the biggest jump on record in 2021 as record house price appreciation dramatically changed the definition of a “normal” housing market.

Compliant lending limits saw the biggest jump on record in 2021 as record house price appreciation dramatically changed the definition of a “normal” housing market. The limit for a conforming mortgage on a single family home in most of the country is now set at $647,200an increase of almost $100,000 over the 2021 limits (previous limits were set at $548,250). Most expensive regions of the countrylargely along both coasts, saw the limit increase to a 2022 all-time high of $970,800 (from $822,375).

When a mortgage loan exceeds the conforming loan limit, it is classified as a “jumbo loan”. Conforming loan limits are set by the Federal Housing Finance Authority (FHFA) and are updated at the beginning of each year to reflect changes in the average home price. Since conforming loan limits are calculated to increase with the market, more borrowers should be able to meet their financing needs with a conforming loan, and not need a jumbo loan. Many conforming loans require lower credit scores and more flexibility with down payment amounts. However, we are still in a highly competitive market with many homes facing bidding wars which can move a home into the jumbo category.

Jumbo loans may be a necessary option for consumers given the rates of home price appreciation we are seeing today.

Libby Cooper, Vice President of Mortgage Operations at Zillow Home Loans

So what if you need a jumbo loan?

Home buyers should first be aware of the lending limits in their market. If you think you need a jumbo loan, these are typical differences between jumbo and conforming loan requirements. Jumbo loans generally require a higher credit score – 700 is the minimum score that many lenders will accept for a jumbo loan versus 620 for a conforming loan. Larger down payments are the norm with a jumbo loan; they often require a 20% down payment, but some larger loans require higher down payments. Some jumbo loans will also require proof of larger cash reserves than conventional loans (up to 12 months).

“Jumbo loans may be a necessary option for consumers given the rates of house price appreciation we are seeing today. It is important that homebuyers educate themselves about the loan options available and how what each of these options includes and requires. Zillow Home Loans has a range of jumbo loan options for buyers, with mortgages available up to $2 million,” said Libby Cooper, Vice President of Operations mortgages at Zillow Home Loans.” Our online experience can show you immediately what you may qualify for. Plus, consumers can explore Zillow’s lender marketplace with over 2,700 lending options.”

Zillow’s financial information resources are designed to help borrowers understand and prepare for buying a home. Learn more about jumbo loans and other financing options here.

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