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Because of the ongoing COVID-19 pandemic and the state of the economy, it is no wonder that conforming loan limits were increased to $625,000 effective January 1, 2022. The overriding question now is how high could loan limits rise. Every year the FHFA changes loan limits for conforming mortgages. It does not follow, however, that the limits for FHA and VA loans will necessarily follow suit. What follows is a listing of the loan limits for conforming, conventional, FHA, and VA loans for 2022. Different loans have different features, functions, and benefits.
Conforming FHA VA
Loan Limit $625,000 $422,000 None
High Cost Area $1,000,000 $1,000,000 N/A
Maximum LTV
Purchase 80% (95% w/MI) 96.5% 100%*
Rate and Term Refi 75% (75.01-90% w/MI) 96.5% 90%
Cash Out Refi 75% (80% w/MI) 90% 90%
Maximum DTI 43% 43% 43%
Minimum FICO Score 620 580 N/A
* This is possible on an individual, case by case basis and by exception only.
If you are planning on making a move into a new home, refinancing one you already have, or cashing out equity to pay off other bills, like high-interest credit cards or putting away money for your children’s education or into your 401K for retirement, now is the time to call a loan officer at 7th Level Mortgage. The matrix above is a guideline. Because of the increase in values of properties, as well as the increase in loan limits, NOW is the time to “strike while the iron is hot”.
While history does not guaranty what may happen in the future with mortgage rates, loan limits, regulatory changes and there are sufficient indicators that support the decision to call 7th Level Mortgage today to discuss your options. According to the Fannie Mae Economic and Strategic Research Group, it is expected that the fed will increase mortgage rates in 2022. The expectations for a rate increase are due to the possible increase in inflation. In the fourth quarter of 2022, inflation is expected to be at 6.2%. Therefore, waiting until after the new year to refinance, especially if you are cashing out equity to negate the consequences of an uptick in credit card bills due to the adjustability of credit card rates, would be penny wise and dollar foolish.
While there is no way to predict exactly what the fed will do with rate increases, it is expected that rates will begin a 25 basis point increase during the fourth quarter of 2022. If the rate of inflation continues on the track it is currently on, we expect rates to possibly move higher earlier than the fourth quarter. When I was a loan officer, many clients would wait for a 1/8th drop in an interest rate only to have rates go up. There is a difference between saving money and milking the rates like a soup bone. By way of example, the payment on a 30 year fixed rate mortgage at 3.25%, assuming the balance is
$100,000, is $435.00. At 3.125%, the payment would be $428.00. To wait to save $7.00, would be very risky, especially since all the indicators are showing an increase is likely definite in the long term, but also very possible in the short term.
At this time of year, with the holidays coming and the inevitable increase in credit card usage, I urge you to call 7th Level Mortgage today to cash out equity in your home, save the money and then when your credit card bills come due in January, pay them with the cash you have saved. You can also save money for a winter holiday vacation to a warmer climate like Hawaii or Florida. For those of you who have children and grandchildren (like I do), this would be a splendid opportunity to put money away for them in a college fund or for those that are graduating in May, money for a car.
Another often overlooked opportunity is shortening the term of your home mortgage loan from a 30 year fixed to a 15 year fixed. While the payment may go up a little, the savings in interest would be substantial. On a 30 year $100,000 loan at 3.25% the interest paid would be $ 97,500. The average 15-year mortgage rate is 2.75%. The interest paid out in fifteen years is $41,250. The interest saved would be $56,250, providing you hold onto the home for the entire term. Call 7th Level Mortgage today to go over all your options and provide for yourself a brighter future and a more stable 2022!