A conforming loan is a type of home loan that has to conform to specific guidelines. Those guidelines are set by Government Sponsored Entities (or GSE’s) like loan providers such as Fannie Mae or Freddie Mac. The loan amount is only one of the criteria needed to be classified as a Conforming loan.

A High Balance loan, sometimes called a high-cost county loan, is slightly different from the standard conforming loan. These loan limits are derived from the average home prices of that particular county. These loans also have a ceiling of 150% of the baseline mortgage.

Why Did the Loan Limit Go Up?

In 2008 the mandate of the Housing and Economic Recovery Act declared that the conforming loan limit was to be adjusted every year in reflection to the changes to average prices of homes. In 2020, the Federal Housing Finance Agency raised the maximum limit for single-family properties. Those new limits apply to conforming loans that follow the GSE’s guidelines.

The Federal Housing Finance Agency increases the limits every year, so rates are always changing. Those loans that exceed the baseline amounts turn the loan into a jumbo loan. If you plan to take out a mortgage loan, be sure to stay up to date on loan limits.

Why Loan Limits Matter

If the loan reaches a limit that turns it into a jumbo loan, the requirements can change. Lenders may require:

  • A higher credit score. 680 is the minimum that most lenders require for a jumbo loan. Some lenders may have other credit score requirements.
  • More cash assets. Knowing you have cash assets and minimal debt makes lenders more likely to approve your jumbo loan amount.
  • A larger down payment. Requirements vary by lender and can fluctuate depending on your credit score and other factors like your financial history.
  • A second appraisal. Some lenders require you to get a second opinion on the home’s value. The second opinion ensures that it’s worth the amount you’re trying to borrow.
  • Additional fees. Since you’re borrowing a larger amount, there are sometimes extra steps in the loan process. That can lead to higher closing costs.

Related: 580 Credit Scores

How Does This Affect High-Cost Areas?

Depending on the surrounding market conforming loan limits can be higher in the more expensive housing markets. While the maximum loan limit is pre-set on the median of the surrounding homes’ value, the FHFA will still set a maximum cap on the loan limit.

High-cost areas are counties in which 115% of the local median home value exceeds the current loan limits. The maximum limit will be higher than the baseline. These are the more expensive neighborhoods. Some of these areas may see increases of upwards of 150%.

House keys being handed off

How Do Loan Limits Affect Borrowers?

New loan limits are restricted to new loans only. New year terms will not affect those who already have a pre-existing loan or have recently acquired their loan. Those who are in the process should check with their lender.

Higher loan limits are seen as an added value to those looking to purchase a home. It allows the homebuyer the ability to buy a higher-priced home but limits their loan amount. This provides greater flexibility.

The New Loan Limits in Orange County

Orange County is considered to be one of the highest costing counties in California. This area of living increases the maximum loan limit from $765,600 up to $822,375. Causing single-family homes to increase by 7.42%.

Related: 11 Cities you can buy a home under $150,000

Conventional Conforming Loan Limits in 2021

In 2020 the loan limit was set at $510,400. In 2021 the limit was increased by more than 5% by the Federal Housing Finance Administration. The new average home value in the U.S. was raised to $548,250 for conventional financing. The jumbo loan amount was increased to $822,375 for the high-cost counties of California. Other states and areas may have exceptions to these limits.

FIPS State CodeFIPS County CodeCounty NameStateCBSA NumberOne-UnitTwo-UnitThree-UnitFour-Unit
637LOS ANGELES COUNTYCA31080$822,375$1,053,000$1,272,750$1,581,750
659ORANGE COUNTYCA31080$822,375$1,053,000$1,272,750$1,581,750
665RIVERSIDE COUNTYCA40140$548,250$702,000$848,500$1,054,500
671SAN BERNARDINO COUNTYCA40140$548,250$702,000$848,500$1,054,500
673SAN DIEGO COUNTYCA41740$753,250$964,300$1,165,600$1,448,600
6111VENTURA COUNTYCA37100$739,450$946,650$1,144,250$1,422,050

Jumbo Loan Limits in 2021

Most of the U.S. saw an increase from the 2020 limits when the Federal Housing Finance Agency announced conforming loan limits for the 2021 year. This was largely in relation to the rising prices of homes. That leads to the limit for when a loan becomes a jumbo loan is also increased. Depending on if you are looking to finance a home that was near the cutoff price, this rise could be a very good thing.

While some areas of California have high loan limits, these may be even higher in places outside the contiguous U.S., like Hawaii.

Are you looking for an independent mortgage expert? Mares Mortgage is ready to help.

FHA Conforming Loan Limits in 2021

The Federal Housing Finance Agency is responsible for announcing the maximum on the conforming loan limits. These limits are placed on mortgages that are acquired by GSE’s. In 2021 most of the maximum conforming loan limit for single-unit properties will be $548,250.

MSA Name
MSA Code
DivisionCounty Name
County
Code
State
One-FamilyTwo-Family
Three-Family
Four-Family
Median Sale Price
Last Revised
Limit Year
LOS ANGELES-LONG BEACH-ANAHEIM, CA3108031084LOS ANGELES37CA$822,375$1,053,000$1,272,750$1,581,750$839,00001/01/2021CY2021
RIVERSIDE-SAN BERNARDINO-ONTARIO, CA40140RIVERSIDE65CA$477,250$610,950$738,500$917,800$415,00001/01/2021CY2021
SAN DIEGO-CHULA VISTA-CARLSBAD, CA41740SAN DIEGO73CA$753,250$964,300$1,165,600$1,448,600$655,00001/01/2021CY2021

Baseline limit

The baseline limit is also a reflection of the current housing prices. The HERA requires that the baseline be adjusted every year as well as the loan limits.

Homes by the Pacific Coast

VA Conforming Loan Limits in 2021

January of 2020 was a big deal for veterans who were looking for jumbo loans or those who just wished to live in higher-cost areas. As of January 1st, 2020, veterans are no longer subject to the federal VA loan limits. This means that they are able to obtain no down payments and VA-backed loans. These new loans are available across the country regardless of housing area prices. VA loan limits were removed because the Department of Veterans Affairs is now able to back the loans that they expect to exceed the current loan limits.

Related: Can you buy a home with no money down?

Shopping for a New Loan in 2021

While there are always fluctuations in the housing market, buying a house is still within many people’s reach. Even those looking for a jumbo loan still have options available to them. Knowing the loan limits can help to refine your search as a house hunter.

Mares Mortgage is rated first in Orange County and is recommended as the most convenient home loan option. Their standards have been perfected for over two decades, and they are ready to help you get the mortgage loan you are looking for.

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