The threshold for a jumbo mortgage loan in the San Francisco Bay Area has been…
Will California loan limits go up in 2024? And if so, by how much?
This is a common question among mortgage professionals and borrowers alike, as we approach the last month of the year. Borrowers, in particular, want to know what the maximum mortgage loan amount for California will be in 2024.
We should have the official answer in a week or so. The Federal Housing Finance Agency (FHFA), the government agency that establishes conforming loan limits, typically announces the next year’s limits toward the end of November.
For the past few years, California’s loan limits have increased from one year to the next due to rising home prices. But house values haven’t risen much over the past year, partly because of a real estate cooling trend that affected the entire nation.
In some cities across the Golden State, home prices either remained flat or dipped slightly during 2023. That same trend played out in may housing markets across the country.
So if the loan limits to do up in 2024, as expected, it probably won’t be a major increase.
California Loan Limits Could Go Up in 2024
Many mortgage industry analysts expect the conforming loan limits to go up in 2024.
While nothing is official yet, the FHFA has projected that the revised limit for one-unit properties in the continental U.S. will increase to $750,000. That would be an increase of 3.28% from the current nationwide cap of $726,200.
In fact, some mortgage lenders have already begun to honor these higher limits, and more will follow suit over the coming days.
But there are three things you should know:
- Loan limits vary by county because they are based on home prices.
- Housing markets with higher prices tend to have higher loan limits.
- You could borrow well above these limits if your income supports it.
We’ll circle back to this projected increase for 2024 in just a moment. But first, let’s clarify some of the terminology being used here, since it tends to confuse people.
What Is a ‘Conforming’ Loan, Exactly?
A conforming loan is a mortgage that meets the guidelines set by Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that purchase and securitize mortgages.
Conforming loans must fall within certain size limits set by the Federal Housing Finance Agency (FHFA). The 2023 loan limit for one-unit properties in most areas of the United States is $726,200.
In California, a state with higher-than-average home prices, the conforming loan limits for a single-family property can be as high as $1,089,300. That’s the current (2023) limit for Southern California and much of the San Francisco Bay Area, both of which have median home prices well above the statewide average.
A Modest Increase Likely in California
Home prices in California have risen over the past year, but not by much.
In 2022, housing markets all across the U.S. went through a cooling phase, following the overheated conditions of the previous two years. Prices dropped in many cities, especially in formerly red-hot housing markets like Austin, Texas and Boise, Idaho.
This downturn continued through the first half of 2023. In California, home prices hit an all-time high last summer and then declined for five or six months in a row before finding a “bottom.”
More recently, over the past few months, home prices in the Golden State have been on the rise again. But the gains have been modest.
According to Zillow, the statewide median home price rose by around 0.9% over the past 12 months or so. That’s probably not enough to warrant a significant increase in California conforming loan limits for 2024.
Instead, we could see a small increase in loan limits for most counties across the state. We’ll know more toward the end of this month. That’s when the FHFA will announce the official changes for conforming loan limits nationwide, including the expected increase.
Southern California, in particular, has experienced the biggest price gains over the past year. So they might see a bigger increase in loan limits as well, since the two metrics go hand-in-hand.
Larger Mortgage Loans Are Available
When you borrow more than the conforming limit for your county (or the county where the home is located), you’re using what’s known as a jumbo loan.
And that’s okay, as long as you have the income needed to manage your monthly payments and other recurring debts.
A jumbo loan is any mortgage loan that exceeds the conforming loan limit for a particular county. Jumbo mortgages bring more risk for lenders, due to the larger amount being borrowed. So they often require larger down payments and higher credit scores.
Borrowers with sufficient income can even use what’s known as a “super jumbo” mortgage loan in California, borrowing up to $5 million in some cases.
Here’s another way to think of it:
- Conforming loan limits restrict the size of a loan that can be sold to Fannie Mae or Freddie Mac.
- But they don’t limit the amount of money a person can borrow when buying a house, because there are other financing paths available.
Borrowers with sufficient income, strong credit, and a manageable level of debt can borrow well over $1 million toward a home purchase in California. It’s a common occurrence.
Have Financing Questions?
Bridgepoint Funding offers a variety of home loan options and serves borrowers all across the Golden State. Whether you’re buying a $500,000 home or a $5 million property, we can find a loan that works for you.
As a California mortgage broker, we work with a variety of lenders instead of just one. This allows us to match each client with the best financing strategy for their individual needs.
Please contact us with your mortgage-related questions or to get pre-approved!