Conforming Loan Limits Are Higher in 2022, but How Much Should You Borrow for a Home?

A woman pointing to a contract on a desk for a man and woman to sign.

Image source: Getty Images

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

There's a difference between what you can borrow and what you should borrow.

Key points

  • In 2022, conforming loans max out at $647,200 in most of the country and $970,800 in high-cost areas.
  • You may need to keep your mortgage to a much lower number.

It's no secret that home values have risen on a national level. In October, they were up 17.4% from the previous year, according to the Federal Housing Finance Agency.

It's not surprising, then, that conforming loan limits are up in 2022 to account for higher home values. This year, conforming mortgages max out at $647,200 in most of the United States. In higher-cost areas, they can go up to $970,800.

But while home buyers who want a conforming loan may have the option to borrow more this year, that doesn't mean they should. Here's how to know how much of a mortgage you're safe to take out.

Don't get in over your head with a mortgage

As a general rule, it's a good idea to keep your monthly housing costs to 30% or less of your take-home pay. Those costs include things like your:

  • Mortgage payment
  • Property taxes
  • Homeowners insurance
  • Private mortgage insurance payments, if applicable
  • HOA fees, if applicable

Say you bring home $4,000 a month. That means you should be spending no more than $1,200 a month on housing. If you'll be making a 20% down payment on your home, then you won't have to worry about private mortgage insurance. And if you're not buying a home in an HOA, then HOA fees won't apply to you.

But you'll still need to keep your mortgage payment, property taxes, and homeowners insurance to $1,200 or less. If you research homes in your target neighborhood based on your price range and find that you're looking at roughly $200 a month in property taxes and $80 a month in homeowners insurance costs, then you're left with $920 that you can afford to spend on a mortgage. In that case, you can use a mortgage calculator to determine how much of a home loan you can afford.

What happens if you borrow too much?

You may be familiar with the term "house poor." It's a scenario that occurs when so much of your income goes toward housing that there's little left over for your remaining bills.

Taking on too much of a mortgage could not only make you house poor, but land you in serious debt. It could also put you at risk of losing your home altogether.

Since conforming loan limits are up this year, the temptation may be there to borrow more money for a home than you normally would. But before you go that route, run the numbers and aim to stick to that 30% threshold.

Remember, the loan amount you get approved to borrow isn't necessarily the amount you should borrow. While your mortgage lender will look at different factors, like your credit score, existing debts, and income, to determine the loan amount you're eligible for, you may have other expenses your lender isn't aware of. Or, you may have new expenses coming down the pike. If you have a baby on the way and you expect to spend $1,000 a month on daycare for that child, that changes your financial picture substantially.

That's why your best bet is to do your own number-crunching and err on the side of borrowing conservatively. The last thing you want to do is take on too much house and regret it afterward.

Our Research Expert