Higher mortgage, loan limits will help entry level buyers

By Mike Sunnucks | Rose Law Group Reporter

Federal housing agencies are increasing mortgage and loan limits for 2022 including in the Phoenix metropolitan area.

That could help more entry level and first-time buyers qualify for mortgages and buy homes in the Phoenix area where rising prices have challenged demand, according to Steven Hensley, advisory manager for real estate research firm Zonda.

Hensley said the higher loan limits will allow for more entry level purchases and could add more than 100 new home communities to the Phoenix area developments where federally backed loans could be utilized.

The Federal Housing Finance Agency has increased its 2022 conforming loan limits to $647,200 up from $548,250.

That is a $98,950 increase.

The Federal Housing Administration has also increased its 2022 mortgage limit to $441,600 from $368,000 in 2021. That is a $73,600 increase.

“These increases account for median home price changes and in turn would enable homebuyers to borrow more money for mortgages. Given this increase, and depending on what happens with mortgage interest rates, it would not be surprising if metro Phoenix new home prices appreciate by double digits again next year,” Hensley said.

Hensley said Zonda is projecting a 4% to 6% increase in home prices in the Phoenix market in 2022 but the increased loan limits could propel more demand and push up prices by as much as 8% to 10%.

“People will be able to qualify for larger payments,” Hensley said.

The higher loan limits are based on local markets’ housing prices and will also add more qualifying residential developments in Las Vegas, Houston, Riverside and other growth markets where home prices have risen, according to Zonda’s research.

Phoenix has seen significant rises in home prices — which build equity for homeowners and bolster builders sales. But higher prices have pushed some entry level buyers out of the local housing market.

Hensley said a potential concern of the higher mortgage limits if buyers are able to put down small payments and then housing prices dip or interest rates rise negatively impacting equity.

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December 2021