California Compliant Loan Limits To Increase In 2021, Due To Rising Prices
Earlier this week, the Federal Housing Finance Agency announcement that compliant loan limits for California will increase in 2021. This is a direct response to rising home values statewide.
The 2021 loan limits for California counties will range from $ 548,250 to $ 822,375, for a single-family property. This is a significant increase from the current caps, which range from $ 510,400 to $ 765,600 depending on the county. These changes take effect on January 1, 2021.
California gets higher loan limits in 2021
The term “compliant loan limit” refers to the maximum amount of an ordinary or conventional mortgage loan. Conventional mortgage products can be sold to Freddie Mac and Fannie Mae and then resold to investors.
In order to go through this resale process, home loans must meet certain requirements and parameters. And that includes meeting a maximum size limit.
When a person borrows Following as the loan limit conforms for their particular county, it is a “jumbo” mortgage. Lenders usually set higher standards and requirements for jumbo loans, due to the larger amount borrowed. This can include higher credit scores and larger down payments, among others.
Compliant loan limits vary by county because they are based on the median home value. For California’s 58 counties, compliant loan limits for 2021 will range from $ 548,250 to $ 822,375. High-priced real estate markets (with a higher median house price) tend to have higher limits, and vice versa.
Ten of California’s 58 counties are considered “high cost areas” and therefore have the maximum compliant loan limit of $ 822,375. This applies to most of the San Francisco Bay Area, Metro Los Angeles, Orange County, and Santa Cruz. See the table below for more details.
Table: Compliant loan limits by county
The table below shows the 2021 compliant loan limits for all counties in California. This table has been adapted from a table provided by the FHFA.
Note: The “one unit” column on the right is for an ordinary single-family home. There are higher limits for multi-family properties, such as duplexes and triplexes. Thus, the figures below apply to typical scenarios of buying a house with only one residence.
|county||Limit of one unit|
|CONTRA COSTA||$ 822,375|
|NORTH LED||$ 548,250|
|LOS ANGELES||$ 822,375|
|TO PLACE||$ 598,000|
|RIVER EDGE||$ 548,250|
|SAN BÉNITO||$ 822,375|
|SAN BERNARDINO||$ 548,250|
|SAN DIEGO||$ 753,250|
|SAN FRANCISCO||$ 822,375|
|SAN JOAQUIN||$ 548,250|
|SAN LUIS OBISPO||$ 701,500|
|SAN MATEO||$ 822,375|
|SANTA BARBARE||$ 660,100|
|SANTA CLARA||$ 822,375|
|SANTA CRUZ||$ 822,375|
Another year, another increase
The maximum mortgage amounts for conventional loans are determined by the Federal Housing Finance Agency (FHFA). This agency oversees Freddie Mac and Fannie Mae, the “government sponsored companies” that buy mortgages from lenders and sell them to investors.
Each year, FHFA officials review house price trends in counties across the country and decide whether or not to increase loan limits. This year, they determined that home prices across the country had risen enough to warrant higher loan limits for 2021.
A response to rising house prices
In most California cities, home values have risen steadily throughout 2020. This may seem counterintuitive, given the coronavirus pandemic and the ongoing economic downturn. But the real estate market has been the only bright spot in the economy at large.
Record mortgage rates and strong buyer demand have pushed home prices up at a time when one would expect the opposite trend. Due to these trends, California will have higher compliant loan limits in 2021.
According to real estate data company Zillow, the median home value in California has increased about 6.3% in the past year. Company analysts predict even bigger gains for 2021.
In November, the company said, “California home values have risen 6.3% in the past year and Zillow predicts they will rise 8.3% next year.
A recent report from the California Association of Realtors showed even bigger gains, analyzing a different metric. According to their November 2020 report, the median selling price of existing single-family homes across the state increased 17.5% from October 2019 to October 2020.
Given these trends, it’s no surprise to see higher compliant loan limits for California counties in 2021.