Conforming Loan Limits in California: A Complete Guide for 2023

California’s real estate market is known for its high home prices, especially in major metropolitan areas like San Francisco and Los Angeles. This means mortgage loan limits play an important role for homebuyers in the state.

What Are Conforming Loan Limits?

Conforming loan limits are maximum loan amounts for mortgages backed by Fannie Mae and Freddie Mac Loans at or below these limits are called “conforming loans”

Conforming loans have more flexible underwriting guidelines and lower interest rates than jumbo loans which exceed the conforming loan limits. The limits vary by county and are adjusted annually.

Current Conforming Loan Limits in California

For 2023, the baseline conforming loan limit for most California counties is $766,500 for a single-family home. This is an increase from $726,200 in 2022.

However, limits are higher in certain high-cost counties

• San Francisco, San Mateo, Santa Clara Counties: $1,119,250
• Santa Cruz, Monterey Counties: $920,000
• San Luis Obispo County: $929,200
• Santa Barbara County: $838,350
• Ventura County: $954,500
• San Diego County: $1,006,250
• Alameda, Contra Costa, Marin Counties: $1,119,250
• Napa County: $1,017,750
• Sonoma County: $877,450
• Los Angeles, Orange Counties: $1,119,250

You can check the Fannie Mae website for full details on California’s county loan limits.

How Conforming Loan Limits Are Determined

The conforming loan limits are set each year by the Federal Housing Finance Agency (FHFA), based on changes in the average U.S. home price. By law, the baseline limit cannot exceed 115% of the average home price in the continental U.S.

For high-cost areas like California, the limit is set at 150% of the baseline loan limit. The specific county limits are based on median home values in that county.

Conforming vs Jumbo Loans

If your mortgage amount exceeds the conforming limit for your county, you will need a jumbo loan.

The main advantages of conforming loans are:

• Lower interest rates – Conforming loans typically have rates 0.25% to 0.5% lower than jumbo loans. This can add up to thousands in interest savings.

• Lower down payments – Conforming loans require as little as 3% down for first-time buyers. Jumbos often require at least 10-20%.

• More flexible credit scores – Conforming loans can be available for borrowers with credit scores as low as 620, versus 700+ for jumbos.

• Lower fees – Origination fees and closing costs are typically lower on conforming loans.

The tradeoff is that jumbo loans allow you to purchase more expensive properties that conforming loans cannot finance.

Tips for Getting a Conforming Loan

If your goal is to get a conforming loan, here are some tips:

• Shop around – Compare rates and fees from multiple lenders. Online lenders, credit unions, and mid-size banks are likely to offer the lowest conforming loan rates.

• Improve your credit – Work on raising your credit score to qualify for better loan terms.

• Save for a larger down payment – Putting down 20% or more can get you a lower rate. But even 5-10% down can make a conforming loan feasible.

• Lower your debt-to-income ratio – Lenders will look at your total monthly debts vs income. Paying down debts can help you qualify.

• Buy a lower-priced home – Conforming loan limits will go further outside of major metro areas, where home prices are lower.

• Use down payment assistance programs – First-time buyer programs in California can help cover your down payment. This reduces the loan amount needed.

The Bottom Line

Conforming loan limits allow many California homebuyers to obtain mortgages with better terms and rates. But the state’s high prices mean you need to carefully manage your financing to stay within the limits.

Following the strategies above improves your chances of getting an affordable conforming mortgage loan to buy your dream home in California.