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How Much Can I Borrow for a Home Loan in the Bay Area?

The San Francisco Bay Area is one of the priciest real estate markets in America. The median home value in this region of California rose above $1.3 million earlier this year.

As a result, most home buyers who purchase a house in the area have to use a mortgage loan to help finance it. And one of the most common questions among this group is:

“How much can I borrow for a home loan in the Bay Area?”

There are several factors that determine how much you can borrow for a mortgage loan. But it mostly comes down to two things — your debt and income. Below, we’ll explain how these two interrelated factors can affect your maximum loan amount.

How Much Can I Borrow for a Home Loan?

As mentioned above, your debt and income levels can determine how much you’re able to borrow on a Bay Area mortgage loan.

In fact, these two components are combined into what’s known as the debt-to-income ratio, or DTI. While there are several factors that can affect your borrowing capacity, the DTI ratio weighs heavily. It’s one of the primary checkpoints used by banks and lenders.

As you might have guessed, this ratio compares the amount of money you earn (via income), to the amount you spend on your various recurring debts.

There aren’t very many hard-and-fast rules regarding the debt-to-income ratio. Depending on the type of loan being used and other factors, this limit is usually set somewhere in the 43% – 50% range.

Let’s use the 43% threshold as an example. With this requirement, your combined monthly debts would not be allowed to exceed 43% of your monthly income. In this context, “combined” debts include the mortgage payment and all other recurring expenses (e.g., credit cards, car payment, student loans, etc.).

Note: The 43% limit is being used for illustrative purposes. Borrowers who are otherwise well-qualified for a mortgage loan can often exceed the 43% DTI ratio limit used in this example.

So that’s one way banks and mortgage lenders determine how much you can borrow on a Bay Area home loan. They consider the debt-to-income ratio and establish some kind of maximum limit for borrowers.

How Your Credit History Ties Into This

Having a good credit history can help you qualify for a mortgage loan in the Bay Area. In this context, we’re talking about the manner in which you’ve borrowed and repaid money in the past.

People who pay their bills on time and use credit sparingly tend to have higher credit scores. On the other hand, those who often miss payments and/or “max out” their credit cards tend to have lower scores.

By itself, your credit score won’t necessarily determine how much you can borrow for a home purchase in the Bay Area. But it is part of the bigger picture, when it comes to mortgage qualification and loan amount.

Generally speaking, borrowers with good or excellent credit tend to have an easier time qualifying for home loans. Good credit could also help you qualify for the lowest possible mortgage rate. So there are multiple benefits.

And Lastly, We Have Loan Limits

County-specific loan limits can also determine how much you’re able to borrow on a Bay Area mortgage loan.

For example, the current limit (or maximum amount) for an FHA loan here in Contra Costa County is $970,800. So a borrower who wanted to use that particular mortgage program would have to stay at or below this range.

Conventional, or non-government-backed, mortgage products also have limits. They too can vary by county, because they’re based on median home values. But it’s possible for someone to borrow more than the Bay Area loan limits, as long as they have the income to support it.

As you can see, there are many different factors that can affect the maximum amount you’re able to borrow. But it mostly comes down to your current income and debt situation.

It’s also not the kind of question that can be answered for all borrowers, across the board. Every mortgage lending scenario is different, because every borrower is different. That’s why it is so important to speak with a knowledgeable mortgage professional about your financing options.

Need a mortgage quote? Bridgepoint Funding is located in the San Francisco Bay Area and offers a broad range of home loan options. We can review your financial situation to determine how much you might be able to borrow toward a mortgage. Please contact our staff with any questions you have.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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