As home prices across California and the nation continue to rise, Fannie Mae and Freddie Mac have increased their caps for high-balance loan limits.
In Southern California, those loan limits are going up 5.2% in Los Angeles and Orange counties to $1,209,750 for 2025, compared with 2024’s $1,149,825.
San Diego County’s loan limit is increasing 7% to $1,077,550 for 2025 compared with $1,006,250 in 2024.
Also see: California offers down 3.5% payment program for first-time homebuyers
Even the Inland Empire, which is not considered a high-cost area, will see its conforming loan limit rise 5.2% to $806,500 for 2025 compared with 2024’s limit of $766,550.
To be clear, LA, OC and San Diego counties also offer the $806,500 conforming loan limit, which comes with a mortgage rate roughly one-quarter-percent cheaper than the high balance rate, just like the Inland Empire. Anything over $806,500 will trigger the more expensive high-balance mortgage.
The Federal Housing Finance Agency or FHFA is Fannie Mae and Freddie Mac’s regulator and conservator. Annually, FHFA determines new loan limits in respect to the Housing and Economic Recovery Act of 2008, requiring the limit to be adjusted to reflect the changes in the national average home price.
More on mortgages: FHA has loan option for low-FICO homebuyers
It’s interesting to note that in just nine years, the high balance loan limit for 2025 will be nearly double the 2016 loan limit of $625,500. In other words, has your home’s value doubled in the last 9 years? In some parts of Southern California, that answer is likely yes.
For anyone who wants to buy units, the conforming loan limits are $1,032,650 for two units, $1,248,150 for three units and $1,551,250 for four units.
For high balance (LA and OC) the loan limits are $1,548,975 for two units, $1,872,225 for three units and $2,326,875 for four units.
High balance limits in San Diego County are $1,379,450 for two units, $1,667,458 for three units and $2,072,250 for four units.
Also see: Homeowners can get cash-out second mortgages to fund small rental properties
The Federal Housing Administration follows the same loan limits as Los Angeles, Orange and San Diego counties. The Inland Empire’s loan limits are lower: $672,900 for one unit, $861,250 for two units, $1,041,050 for three units and $1,293,750 for four units.
For reverse mortgages or home equity conversion mortgage, the nationwide mortgage ceiling or maximum claim amount rises to $1,209,750 from the current limit of $1,149,825. The reverse mortgage maximum claim is the cap on the value that can be used to calculate your principal limit. In other words, if your home is worth $2 million, HUD will only recognize $1,209,750 for the maximum value on which to base your loan amount.
Most lenders will immediately fund conventional mortgages from the new loan limits. FHA’s new loan limits start with new case numbers on Jan. 1.
The Department of Veterans Affairs or VA generally follows FHFA loan limits. The VA has allowances for higher loan amounts, though. New VA loan limits also start Jan. 1.
Freddie Mac rate news
The 30-year fixed rate averaged 6.81%, 3 basis points lower than last week. The 15-year fixed rate averaged 6.1%, 8 basis points higher than last week.
The Mortgage Bankers Association reported a 6.3% mortgage application increase compared with one week ago.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $806,500 loan, last year’s payment was $222 more than this week’s payment of $5,263.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.75%, a 15-year conventional at 5.5%, a 30-year conventional at 6.25%, a 15-year conventional high balance at 5.99% ($806,501 to $1,209,750 in LA and OC and $806,501 to $1,077,550 in San Diego), a 30-year-high balance conventional at 6.625% and a jumbo 30-year fixed at 6.5%.
Eye-catcher loan program of the week: A 30-year mortgage, with 30% down locked for the first 5 years at 5.875% with 1 point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com.
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