The steep rise in home prices nationwide has caused a significant jump in how much you can borrow with a conforming loan—that is, a mortgage that meets guidelines set by government-backed institutions Fannie Mae and Freddie Mac. For 2022, the standard conforming limit for single-unit properties is $647,200, an increase of nearly $100,000 from the 2021 cap. In areas with a high cost of living, the loan limits are higher—as much as $970,800 for single-unit homes in places including Alaska, Hawaii, Washington, D.C., and certain counties in California, Maryland, New Jersey, New York and Virginia.
Conforming loans are the most common type of mortgage, and they often have lower interest rates than other loans. To borrow more than the conforming limit, you must qualify for a jumbo loan, which usually has a higher rate and stricter underwriting requirements. You may be able to get a conforming loan with a credit score as low as 620, and a 740 or higher score can get you the best rates. Jumbos may not be available to borrowers with credit scores below the mid-to-upper 600s, and you’ll need a credit score of at least 760 for the best rates, says Keith Gumbinger, vice president of mortgage research site HSH.com. A conforming loan may have a loan-to-value ratio (the amount borrowed expressed as a percentage of the property’s value) of up to 95%, while a jumbo loan’s LTV usually can’t surpass 80%, says Gumbinger.
If you have a jumbo loan that now falls within the conforming limit, refinancing may be worthwhile if it lowers your interest rate. Using this online calculator, enter information about your current mortgage and potential new mortgage to see how much your monthly payment would change and the net savings or cost over the life of the new loan.