For the first time in history, loans backed by Freddie and Fannie (about half of all home loans) can go as high as $1,089,300. That’s a nice little jump up from the 2022 limit of $970,800.

What does this mean for home buyers?

That means you can buy a $1.35M home, with 20% down, and avoid the rate hit caused by exceeding the loan limit (and thereby becoming a jumbo loan).

Before this increase, I was advising clients to make BIG down payments – large enough to get the loan size below the limit – even if that meant putting more than 20% down. Some were putting 30% down if they had the savings or gift money coming in to help with the down payment.

The other option was to keep the purchase price lower than what they qualified for. Some opted to make offers low enough to keep their loan size under the limit.

Both of these options were just so clients could take advantage of the lower rates. Sometimes, the higher rate of a jumbo loan would price them out because their monthly income was not enough to cover the principal, interest (plus taxes and insurance) when the rate was higher. In this scenario, the only choice was to come up with a bigger down payment or shop at a lower price point.

This should expand options for people.

This is great for those of us who live in areas where million-dollar homes are the norm. It’s important to note that loan limits vary by county and so not all homes will qualify for this high of a limit, even if they’re in California. This loan limit applies to high-cost areas like LA, OC & SF. Check with me to see what the loan limit is for the county that you’re shopping in.