How Big of a Home Loan Can I Get in California?

A common question among home buyers and mortgage shoppers is: “How big of a home loan can I get in California?”

The best way to answer this question is to get pre-approved for a mortgage loan, and we can definitely help you with that. Just contact our staff to get started. We can assess your current financial situation and tell you how much you’re able to borrow.

But if you’re not yet ready to speak to a mortgage company, you can estimate how much you might be able to borrow by using debt-to-income standards and guidelines. So let’s talk about that…

How Big of a Home Loan Can I Get in California?

When considering applicants for home loans, banks and mortgage companies evaluate the borrower’s debt level in relation to his or her current income. This is known as the debt-to-income ratio, or DTI, and it’s a key factor that can determine how big of a home loan you can obtain in California.

There are two kinds of DTI ratios — one that looks at housing debts only, and one that considers all of your debts combined (mortgage, credit cards, auto loan, etc.). The overall or total version is also known as the “back-end” debt-to-income ratio. This is the one that’s most important, when it comes to qualifying for a mortgage.

So, how big can you go when shopping for a home loan in California? The rules here aren’t written in stone. But lenders typically prefer to see a back-end DTI ratio no higher than 50%. And lower is better. Ideally, your total monthly debts should use no more than 43% of your gross monthly income (a commonly used threshold).

But again, these are just general guidelines. Exceptions can be made for borrowers with excellent credit, significant cash reserves, and other “compensating factors.”

Related: California home loan requirements

The bottom line is that mortgage lenders want you to have sufficient income to manage your monthly house payments, along with your other monthly debts. So they’ll analyze your DTI and other aspects of your financial situation. This kind of due diligence protects the lender and borrower alike. It’s in everyone’s best interest.

Loan Limits Are Also a Factor

Loan limits also play a role here. Most mortgage programs have size limits associated with them. This is true for both FHA and conventional, as well as the VA mortgage program for military members. Debt and income are the two biggest factors that determine how big of a home loan you can get in California. But program limits are also important.

Official loan limits vary by county, because they are based on median home values. So higher-priced real estate markets like the Bay Area and Los Angeles tend to have higher loan limits, when compared to cities and counties with more affordable homes.

For example, the conforming limit for conventional home loans in California ranges from $424,100 in most counties, up to $636,150 in counties with higher median house values.

Home buyers can borrow above these limits in some cases, as long as their income supports the monthly payment. Still, it’s good to familiarize yourself with the loan limits for the particular mortgage program you are considering.

The bottom line: How big you can go with a California home loan will largely depend on your current monthly income in relation to your recurring debts. Loan limits also play a role here, but it’s possible to borrow above those amounts by using a jumbo mortgage or by making a larger down payment.