Conforming Loan Limits for San Diego County
Today I want to review conforming loans and jumbo loans and explain the differences between the two. These loans have become a common topic among our clients that want to buy or build homes.
The Difference Between Conforming and Jumbo Loans
Conforming loans have a loan limit, which is updated every year. The government updates this number, and it is very specific to the location in which you live. If you’re preparing to build or buy in a certain area, an internet search based on a specific county and year will provide the loan tier results. An example for San Diego would be to search the following: “San Diego County Conforming Loan Limits 2021.”
San Diego County Loan Limit
The conforming loan limit for San Diego County this year is $753,250. The conforming loan limit for California is $548,250. Compared to the County of San Diego, California is $200,000 lower. Therefore, higher price markets, like the San Diego County market, maintain a higher conforming loan limit.
What is a Conforming Loan Limit?
A conforming loan limit is the limit, or guideline, that the government sets. The lenders that are Fannie Mae and Freddie Mac lenders can sell conforming loans on the open market because they meet Fannie/Freddie guidelines, which in turn allow the loans to be resold after they are given out. Abiding by the underwriting guidelines and loan limit allow these kinds of loans to stay at or below that conforming loan limit for resale.
What is a Jumbo Loan?
When a loan exceeds the conforming loan limit, it becomes a jumbo loan, which increases the rate. In today’s market, the rate is slightly above 3 for a conforming loan and for jumbo loans, borrowers pay roughly one 10th of a point more, which equates to about 3.13 to 3.15, while conforming loans range between 3.03 to 3.04.
How Do You Get Approved for a Jumbo Loan?
The higher payment for the points often comes on the front end of the loan. This makes the underwriting guidelines a little bit tougher, so the lender looks for more reserves. They will look closer at your employment to ensure that you are a solid borrower. Doing so allows the underwriter to make the loan sellable to someone else because the jumbo loan guidelines are a little tougher to meet.
San Diego County Conforming & Jumbo Loan Recap
To recap, conforming loans for California are the lowest conforming loans out of all counties, which are currently at $548,250. Depending on the area, such as San Diego County at $753,250, the limit may increase. Anything over that limit must be a jumbo loan. Make sure you check your area in the current year. Make sure you also check with the lender to compare the points and rates on a conforming versus a jumbo loan to determine if staying below a budget limit makes sense for your building project.