Here Are the New California FHA Loan Limits for 2021

The Department of Housing and Urban Development (HUD) recently announced that California FHA loan limits will be increased for 2021 in response to rising home values nationwide.

Starting in January, California FHA loan limits for home buyers will range from $356,362 to $822,375, depending on the county where the property is located. That’s for a single-family home with only one residence. There are higher limits for multifamily properties, such as duplexes and triplexes.

According to HUD, these changes will apply to California FHA loans with a case number assigned on or after January 1, 2021.

2021 FHA Loan Limits for All California Counties

Home prices in California have risen steadily throughout 2020. At least in most cities. As a result of that trend, HUD officials have announced they’ll be increasing California FHA loan limits for 2021. The table below shows the revised (higher) limits for all counties across the state.

Note: Specifically, this table shows the maximum FHA loan size for a single-family home purchase. There are higher limits for multifamily properties like duplexes. For a complete list that includes all property types, visit the HUD.gov website.

You’ll notice that most counties in the Bay Area (where we are located) have received California’s maximum FHA loan limit for 2021. In Alameda, Contra Costa, Marin, Santa Clara, San Francisco and San Mateo counties, the maximum FHA loan amount for a single-family home purchase in 2021 will be $822,375.

The other three Bay Area counties — Napa, Solano and Sonoma — will have lower caps next year. Those housing markets are generally less expensive than the six counties listed above, in terms of the median home price. So they’ll have lower FHA limits in 2021. But all counties in California will see an increase from this year to next.

The bottom line here is that home buyers who want to use the Federal Housing Administration’s loan program to purchase a home in 2021 will have a higher financing range to work with, due to the increase in California FHA loan limits.

The Right Mortgage Program for You?

Like most mortgage financing options, FHA loans have their share of pros and cons. As a result, this program is well suited for some borrowers but less ideal for others. It really comes down to your financial priorities, your credit situation, and other factors.

Definition: An FHA loan is one that gets insured by the federal government, via the Federal Housing Administration (part of HUD). The lender makes the loan, and the government partially insures the lender against losses that might occur if the borrower fails to repay. The FHA does not lend money directly to home buyers.

Borrowers who have trouble qualifying for a “regular” conventional mortgage loan often turn to the FHA program as a backup. That’s one of its advantages. It’s generally easier to qualify for, due to the government backing mentioned above. This program also allows borrowers to put down as little as 3.5% on a home purchase.

But these things come at a price. Home buyers who use a California FHA loan to buy a house usually have to pay two kinds of mortgage insurance. There’s an upfront premium along with an annual premium. Despite their names, both can be “rolled into” the loan. Thus, these premiums increase the size of your monthly payments.

Learn more about FHA mortgage insurance

For some borrowers, the ability to qualify for an FHA loan (with a fairly low down payment) makes up for the modest increase in monthly payments. So this program does have its place, among the other financing options.

Conforming Limits Are Also Going Up

In case you missed it, we recently published a related blog post about conforming loan limits being increased for 2021. These are the caps that apply to conventional or “regular” mortgage products — those that are not insured or guaranteed by the government. (The term “conventional” differentiates these loans from the FHA and VA programs.)

Starting in January 2021, the conforming loan limits for California will range from $548,250 to $822,375 for a single-family home purchase. Anything bigger than that would be considered a jumbo mortgage, which usually brings extra scrutiny.