San Diego Gets Higher Conforming Loan Limits for 2016

Home prices in San Diego County rose significantly in 2015, enough to prompt the Federal Housing Finance Agency (FHFA) to increase the county’s conforming loan limits. In 2016, mortgage borrowers will be able to finance up to $580,750 without crossing into “jumbo” loan territory.

San Diego Conforming Loan Limits for 2016

A conforming loan limit is the maximum size for mortgages that can be acquired by Freddie Mac and Fannie Mae. Anything larger is considered a jumbo loan and usually comes with stricter underwriting criteria. Most of the mortgage loans originated in the San Diego real estate market fall into the conforming category, though jumbos are still widely available as well.

The current (2015) conforming loan limit for San Diego County is $562,350. But that number will go up next year. San Diego is one of only 39 counties in the U.S. where the conforming loan limits will rise in 2016. For the rest of the country, the 2015 caps will simply “roll over” without any changes.

The 2016 conforming loan limit for San Diego County is $580,750, which marks an increase of $18,400 over the current limit. That’s for a single-family home. There are higher caps for multi-family units, as shown below.

Here are the 2016 limits for all property types:

One-Unit Two-Unit Three-Unit Four-Unit
$580,750 $743,450 $898,700 $1,116,850

Note: In this context, a “one-unit” property is a regular single-family home. A “two-unit” property is a duplex-style home with two separate residents living in it, and so on.

Conforming loan limits are applied countywide. So the maximum mortgage amounts shown above apply to all cities within San Diego County, including (but not limited to) Carlsbad, Del Mar, El Cajon, Escondido, La Mesa, Oceanside and San Marcos.

Aside from San Diego, only three other counties in California will receive loan limit increases for 2016. They are Monterey, Napa and Sonoma. For the rest of the Golden State, the current caps will be carried over into next year with no changes whatsoever.

Conforming loan limits are set by the Federal Housing Finance Agency (FHFA). They vary by county and are based on median home prices within the local area. The limits are reviewed annually and sometimes adjusted to keep pace with rising house values.

According to the FHFA:

“The latest year showed strong home price gains throughout the country and in some locations [including San Diego] those gains were sufficiently large to elevate loan limits above levels in any prior year.”

To be clear, house values have risen in many cities across the U.S. But there were only 39 counties where the annual gains were significant enough to warrant higher loan limits.

Jumbo Mortgages Still Widely Used

San Diego home buyers who need financing above conforming loan limits still have options. The “jumbo” mortgage is one such option.

By definition, a jumbo home loan is one that exceeds the conforming caps for Freddie Mac and Fannie Mae (shown above). These products are usually limited to borrowers with excellent credit and borrowing histories. Down payment requirements tend to be higher for jumbo loans as well. Lenders often require at least 20% down for these “non-conforming” products.

Jumbo loans typically have higher interest rates than their conforming counterparts, all other things being equal. The underwriting process can be stricter as well. This is due to the larger investment, and higher level of risk, on the lender’s part.

To learn more about conforming loan limits in 2016, you can visit our resource website at www.LoanLimits.org.