2022 Mortgage Applicants Sought Larger Loans, Faced Deeper Debt

Elizabeth Renter
By Elizabeth Renter 
Edited by Kathy Hinson

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In 2022, the housing market started out hot, as determined home buyers piled on despite many challenges. Inventory was low, prices and competition were high. But beginning in March of that year, mortgage rates began a dramatic climb that would temper demand by the end of the year.

The average rate on a 30-year fixed mortgage went over 4% in March 2022 for the first time since 2019; it topped 5% in April, the first time since 2011. And by the close of 2022, interest on this most common mortgage type would exceed 7%, a rate not seen in over 20 years.

A look at 2022 mortgage application data from the Consumer Financial Protection Bureau shows some of the initial effects of these higher-and-higher rates. The number of mortgage applications ultimately fell by 16%, and the number of home loans originated — those approved and funded — fell by roughly 1 million compared with the year prior.

Applications fall, requested loan amounts grow (but slower)

Roughly 6 million home purchase mortgage applications were filed with lenders in 2022, according to the data provided under the Home Mortgage Disclosure Act. This marks a 16% decrease in applications from 2021, when about 7.1 million were submitted.

Higher mortgage rates and low inventory no doubt contributed to the reduction. It was one thing to cope with steep home prices when rates were ultra-low in 2021, but steeper rates made already higher prices even less affordable in 2022. Growth in the amount people hoped to borrow did slow during the year, however — the average loan amount for originated mortgages climbed 8% year over year, to $369,900 in 2022. This compared with 15% growth from 2020 to 2021.

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2022 denial reasons point to bigger mortgages

About 7% to 8% of all mortgage applications have resulted in a denial over the past several years, and the most commonly cited reasons for these denials are generally consistent. However, slight differences in this most recent data could be attributed to higher rates combined with high prices.

The share of mortgage applications primarily denied for debt-to-income ratio rose from 31% in 2021 to 35% in 2022. The DTI ratio allows lenders to gauge how easily borrowers can manage their debt payments, and their calculation includes the prospective mortgage. Bigger mortgages mean greater debt-to-income ratios, and applications came in with slightly higher DTIs in 2022.

Collateral accounted for the second largest share (15%) of denied mortgages in 2022. This refers to the value of the home relative to the amount being borrowed, and could indicate inflated sales prices. Through the appraisal process, a lender may determine the home isn’t worth the amount being borrowed. A denial here puts the buyer in a tough spot of either decreasing the amount they hope to get from the lender (by covering the “appraisal gap”), renegotiating a new (lower) sales price, filing an appraisal appeal (which may slow the process), or potentially walking away from the sale.

Fewer government-backed mortgages sought

While total mortgage applications fell 16%, applications for some government-backed mortgages — those guaranteed by the Federal Housing Administration and the U.S. Department of Agriculture — fell more swiftly. Applications for USDA loans in particular fell 44% in 2022.

USDA loans are earmarked for people buying in rural areas. They come with no down payment requirement and lower interest rates than conventional loans. The program encourages home ownership among populations who might otherwise struggle to afford and qualify for a traditional mortgage, while simultaneously encouraging investment in rural communities. Unfortunately, these communities have not been isolated from rising home prices, and these higher prices could be pushing out the very people USDA mortgages hope to support.

What it means for 2023 buyers and beyond

Many of the struggles being felt in late 2022 continue now. There has been little relief from high prices, and mortgage rates have gone even higher. Buyers braving these headwinds will find few homes on the market, which means competition can still seem tough despite higher costs having chased some buyers away.

If you’re interested in buying a home soon, make sure you’re including all of the related costs in your decision-making. A home affordability calculator can help you set a homebuying budget that doesn’t only factor in the home price, but also current mortgage rates, taxes, insurance and other debt obligations you might have. Also, if it’s your first home purchase, look into available first-time home buyer programs in your state; they may provide down payment assistance or more favorable rates.

It may be tempting to sign on for a high-rate mortgage now with the hope of refinancing when rates come down. But the future is uncertain: We may not see significantly lower rates for a few years, and your personal financial situation may change. Refinancing at a lower rate requires healthy credit and many of the same checks and balances as your original mortgage. In other words, consider the risk before making a decision based on the future.


The 2022 mortgage application data filed by lenders with the Consumer Financial Protection Bureau, as required under the Home Mortgage Disclosure Act, is the most recent data available.

NerdWallet looked specifically at home purchase mortgage applications for single-family, site-built (not manufactured) homes. “Total applications” is the sum of applications: originated, approved but not accepted, denied, withdrawn by applicant, and file closed for incompleteness.

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