Considering buying a home in San Diego? If so, then you’ve come to the right place!
Buying a home is a major endeavor, and organizing your finances is a large part of that. For most people, loans are a great way to accomplish purchasing your house! However, knowing the loan limits in San Diego County is an important step before pursuing a mortgage.
In general, the maximum amount you can receive when financing a home purchase is called the conforming loan limit. This money is sourced from a lender who uses federal protection for this transaction. However, this exact amount varies depending on a few factors, such as your county. There are also multiple mortgage tiers to consider based on your needs.
Feeling overwhelmed? No worries! North County Property Group, a leading property management company in San Diego, has provided the following guide to help you learn how to finance your next home purchase!
San Diego County Mortgage Loan Limits in 2022
There are three possible tiers when it comes to mortgages. As of January 1st, 2022, the loan limits in San Diego County are as follows:
Conforming loans: up to $647,200
Super Conforming loans: $647,201 to $879,750
Jumbo loans: $879,750 and over
If a lender tells you that the mortgage loan limit is $647,200, they’re likely referring to conforming loans. You aren’t limited to this amount in San Diego County, however, San Diego County is known for having its real estate be on the pricier side. As a result, you can take out a super conforming loan or even a jumbo loan.
But what’s the difference, you may ask? Why not apply for a jumbo loan as a standard? Many homebuyers lean towards conforming loans due to their lower interest rates. Super conforming loans, and especially jumbo loans, tend to have higher fees, higher interest rates, and very strict standards for those applying.
Ultimately, it depends on the type of property you’re purchasing. Those looking to buy luxury real estate, for example, often lean more towards jumbo loans but with the rising home prices in San Diego, jumbo loans are also becoming more and more popular with the average homebuyer.
An Overview of Conventional Mortgages
Mortgage loans that fall under the conforming or super conforming categories follow Fannie Mae and Freddie Mac guidelines. This basically means that your mortgage is allowed to be sold by lenders on the open market. If you’re new to these concepts, it’s no problem! We’ve provided a brief guide on conventional mortgages below to help:
Fannie Mae and Freddie Mac
The Federal National Mortgage Association (Fannie Mae/FNMA) and The Federal Home Loan Mortgage Corporation (Freddie Mac/FHLMC) were established by Congress as financial services corporations. They are what’s called GSEs, or government-sponsored enterprises.
The purpose of their establishment was to promote credit flow and make homeownership more accessible as a result. This is done through the creation of a secondary mortgage market, which serves to increase the funds available for mortgage loan sources.
In short, lenders make a mortgage, Fannie Mae and Freddie Mac buy this mortgage from them, then give the lender money to provide another mortgage for the next person in need of one. Fannie Mae and Freddie Mac take the mortgages they’ve purchased and sell them on the open market as mortgage-backed securities.
Conforming Loan Limits
Fannie Mae and Freddie Mac won’t purchase just any mortgage offered to them. There are rigid rules in place for what mortgages they accept. A conforming loan, for example, follows these set guidelines. Many lenders follow these rules in order to sell on the secondary market and increase their funds to make more loans. One crucial rule set by Fannie Mae and Freddie Mac is the conforming mortgage limit.
Since 2008, the Federal Housing Finance Agency (FHFA) has overseen Fannie Mae and Freddie Mac. Annual conforming mortgage loan limits are published by the FHFA, detailing the prices depending on location and property type. As of this year, the new San Diego loan limit for single-family properties is $879,750, a whopping $126,500 higher than 2021.
The Case of Jumbo Loans
Luxury homes tend to be priced too high for conventional mortgage lenders. To reiterate, jumbo loans are those above the limits of conforming loans that are guaranteed by the government. In response to this, California has strict requirements for those looking to pursue a jumbo loan. These include:
20% down payment in order to get the top interest rates
FICO score of 700 at minimum, also for the best rates
38-50% debt-to-income ratio
2 million dollar loan ceiling (or rarely 3 million)
Mortgage insurance on LTV (loan-to-value) above 85-90%
FHA Mortgage Loan Limits
The Federal Housing Administration (FHA) guarantees and insures loans, yet they are also subject to mortgage loan limits. Despite being a separate entity from Fannie Mae and Freddie Mac, they tend to have matching loan limits. As such, it will come as no surprise that the 2022 FHA loan limit in San Diego is also $879,750.
VA Mortgage Limits
The U.S. Department of Veterans Affairs (VA) is a unique case. As part of the Blue Water Navy Vietnam Veterans Act of 2019, since January 1st, 2020, there are no loan limits for mortgages insured by the VA. Borrowers are instead dependent on their lender’s qualifications when it comes to mortgage limits.
Buying a home in San Diego is a major choice that requires extensive thought and planning. If you’re thinking of purchasing an investment property in San Diego, you want to make sure your property of choice is one that will provide a great return on investment for the long run.
As the top property management company in San Diego, North County Property Group is where to go if you’re looking for a successful real estate investment experience!
We’re determined to help you reach your financial goals, and with our extensive services and years of industry experience, we’re sure to have all your needs covered. To learn more about how we can help you, contact us today!