A conforming loan is a type of home loan that has to follow specific guidelines. These guidelines are set by Government Sponsored Entities (or GSEs), such as loan providers like Fannie Mae or Freddie Mac. These guidelines govern several factors, including loan size, borrower credit profile, debt-to-income (DTI) ratio, and documentation requirements. While loan amount is the most commonly discussed criterion, it is only one part of the overall qualification framework.
A High Balance loan, sometimes called a high-cost county loan, is slightly different from the standard conforming loan. These loans exceed the national baseline conforming limit but remain within county-specific limits established by the Federal Housing Finance Agency (FHFA). High-balance limits can reach up to 150% of the national baseline, allowing buyers in high-cost California counties to avoid jumbo loan requirements.
In 2008, the Housing and Economic Recovery Act mandated that the conforming loan limit be adjusted annually based on changes in average home prices. In 2020, the Federal Housing Finance Agency raised the maximum limit for single-family properties. These new limits apply to conforming loans that follow the GSEs’ guidelines.
The Federal Housing Finance Agency increases the limits every year, so rates are always changing. Loans that exceed the baseline amounts become jumbo loans. If you plan to take out a mortgage, be sure to stay up to date on loan limits.
Loan limits directly impact mortgage affordability and qualification criteria. Once a loan amount exceeds the conforming or high-balance limit, it becomes a jumbo loan, which typically involves more stringent requirements, such as:
✔ A higher credit score — 680 is the minimum for most jumbo loans
✔ More cash assets — Lenders want to see that you have cash and minimal debt
✔ A larger down payment — This varies depending on credit and financial history
✔ A second appraisal — A second opinion ensures the home is worth the loan amount
✔ Additional fees — More steps may mean higher closing costs
Understanding where your target purchase price falls relative to current loan limits can help you plan more effectively and avoid unexpected financing hurdles.
In high-cost housing markets, such as parts of Southern California and the Bay Area, conforming loan limits are significantly higher than the national baseline. A county is classified as high-cost when 115% of the local median home value exceeds the baseline limit set by the FHFA.
However, even in these areas, loan limits are capped at 150% of the baseline. This ensures consistency nationwide while still accommodating regional market differences.
New loan limits apply only to new loans. They do not affect those who already have a pre-existing loan or have recently acquired one. If you're in the process, check with your lender.
Existing homeowners with mortgages already in place are not affected by annual limit increases. However, buyers who are in the pre-approval or home-search phase may benefit immediately from higher limits.
Higher loan limits can increase purchasing power, reduce the need for jumbo financing, and allow borrowers to secure more favorable interest rates under conforming guidelines.
Orange County consistently ranks among the most expensive housing markets in California. Due to rising median home prices, the maximum conforming loan limit increased from $765,600 to $822,375, reflecting an approximate 7.42% increase in allowable financing for single-family homes.
This adjustment has helped more buyers remain within conforming loan limits while purchasing higher-value properties.
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In 2020, the loan limit was $510,400. In 2021, it was increased by over 5% by the Federal Housing Finance Administration, raising the average home value to $548,250 for conventional financing. In high-cost California counties, the jumbo loan limit rose to $822,375. Other regions may vary.
Most of the U.S. saw increased limits due to rising home prices. That means the cutoff for when a loan becomes a jumbo loan also increased. If you're financing a home near the cutoff, this change may work in your favor.
Some high-cost areas, including Hawaii, have even higher loan limits than those found in the continental U.S.
Looking for an independent mortgage expert? Mares Mortgage is ready to help.
FHA loan limits are also influenced by FHFA data but are set separately by the Department of Housing and Urban Development (HUD). For most single-unit properties, FHA limits mirrored the $548,250 baseline in 2021, with higher limits available in designated high-cost areas.
The baseline limit reflects current housing prices. The HERA Act requires annual adjustments to both baseline and loan limits.
January 2020 brought major changes for veterans. As of January 1, VA loan limits were removed, allowing veterans to obtain no-down-payment, VA-backed loans nationwide, regardless of local housing prices. The Department of Veterans Affairs can now back loans expected to exceed prior limits.
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While housing markets continue to fluctuate, understanding current loan limits can give you a strategic advantage. Whether you are pursuing a conforming, high-balance, jumbo, FHA, or VA loan, working with an experienced mortgage professional ensures you choose the most cost-effective option.
Mares Mortgage is rated #1 in Orange County and brings more than 20 years of experience helping California homebuyers navigate complex lending environments. Their team provides personalized guidance to help you secure the right loan with confidence. Talk to a California Mortgage Expert.
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