Conforming Loans in California
Most California home loans? Conforming. Fannie Mae and Freddie Mac backing. Standard conventional loans. What nearly everyone uses.
But here’s what kills me. People think all conforming loans are identical. They’re not. Rates swing wildly between lenders. Guidelines differ. One lender approves what another rejects instantly.
Been in mortgages since ‘85. Forty years building relationships with 15+ conforming lenders. Banks? They show you one rate. Their rate. That’s it. We show you five rates from five different lenders. Then you pick the best one. That’s the massive difference.
Two Types in California
California gets two conforming loan limits. Most states? Only one. We’re special. Because our housing market’s completely insane.
Standard conforming - Up to $806,500 in most counties. Central Valley. Inland areas. Many suburbs. Places where homes still cost under $800K. They exist. Harder to find every year, but they’re out there.
High-balance conforming - Up to $1,209,750 in expensive counties. SF Bay Area. LA. Orange County. San Diego. Where $1.2M buys you a teardown. Or maybe a decent condo if you’re lucky.
Same exact Fannie Mae and Freddie Mac rules for both types. Only difference? Loan amount based on your county. Guidelines identical. Down payment requirements identical. Credit requirements identical. Just higher limits in counties where government finally acknowledged housing costs are absolutely ridiculous.
County Limits
High-balance counties ($1,209,750):
- Bay Area: Alameda, Contra Costa, Marin, SF, San Mateo, Santa Clara
- SoCal: LA, Orange
- Wine Country: Napa, Sonoma, Santa Cruz
Standard counties ($806,500):
- Central Valley: Fresno, Kern, Merced, San Joaquin, Stanislaus
- Everywhere else
Had a couple moving from Fresno to San Jose last year. Qualified for $780k in Fresno (standard conforming). Moved to San Jose (high-balance county) and same income qualified them for $1.15M. Same debt ratios. Same lender. Just different loan limit. County matters.
Why We’re Different
All conforming loans follow Fannie Mae and Freddie Mac rules. But lenders aren’t the same.
Rates vary – 0.125% to 0.25% difference between lenders. On a $700k loan that’s $60 to $120 monthly. Over 30 years? $21,600 to $43,200 total. Not small money.
Overlays differ – Some lenders add extra requirements beyond base guidelines. Others stick to Fannie/Freddie minimums.
Had a client last month. Self-employed consultant. 720 credit, 15% down, clean finances. First lender rejected him – they require two years of tax returns showing consistent income. Self-employed income bounced around. Second lender? Approved in 72 hours. Same Fannie Mae guidelines. Different overlays.
PMI companies – Different lenders use different PMI providers. Costs and removal policies vary. Some charge 0.5% annually. Others 0.9%. On a $680k loan with 5% down, that’s $272 monthly versus $490 monthly. Same loan amount. Different PMI company.
Speed – Some lenders close in 20 days. Others take 45. We know who’s fast. Competitive California market? Speed wins offers. Sellers pick 21-day close over 45-day close every time.
We’ve worked with the same conforming lenders since the ’90s. We know which one approves self-employed borrowers easiest. Which one loves investment properties. Which one gives best rates for 700 credit scores versus 750. Which underwriters are reasonable versus nitpicky.
This knowledge matters. One lender might quote you 6.75%. Another 6.5%. Same borrower. Same day. Different relationship pricing.
Standard vs High-Balance
Standard ($806,500 max):
- Central Valley, inland areas, suburbs
- Best rates available
- Every lender offers these
- 3% down first-time buyers, 5% repeat
Buying in Sacramento? Stockton? Riverside? You’re using standard conforming. Median home prices work perfectly with this limit.
High-balance ($1,209,750 max):
- Coastal areas, Bay Area, expensive metros
- Rates 0.125% to 0.25% higher
- Most lenders, fewer programs
- Same down payment requirements
San Francisco? Palo Alto? Newport Beach? High-balance territory. Good luck finding anything under $806k there.
Here’s what people don’t realize – high-balance is still conforming. Backed by Fannie and Freddie. Same rules. Same protections. Just higher loan limits for expensive counties. Not a jumbo loan. Not a non-conforming loan. Still government-sponsored enterprise backing.
The rate difference? Usually 0.125% to 0.25%. On a $1.1M loan at 6.5% versus 6.625%, that’s about $95 monthly. Over 30 years, roughly $34k more interest. But you’re buying a Bay Area home. Options are limited. High-balance conforming is still way better than jumbo rates.
Requirements
Credit: 620 minimum. Some lenders want 640+. But here’s the reality – different lenders price differently at different credit tiers.
620 to 639? Expect rate hits. Higher PMI costs. Fewer lender options. 640 to 679? Better pricing. More lenders compete. 680 to 719? Good pricing. Most programs available. 720+? Best rates. Maximum flexibility.
Down payment: 3% first-time buyers, 5% repeat buyers. But more down gets better rates. 5% versus 3%? Usually 0.125% to 0.25% rate improvement. 10% down? Even better. 20% down? No PMI. Best rates available.
DTI: 43% max typically. Up to 50% with strong credit or assets. Automated underwriting systems approve higher DTIs if everything else is strong. Good credit, solid reserves, low loan-to-value? 48% DTI might fly. Borderline credit, minimal down payment? 40% might be pushing it.
Employment: Two years preferred. Job changes okay if same industry. Promotion within same company? No problem. Teacher to principal? Fine. Switching from plumber to tech sales? Needs explanation.
Reserves: 2 months for investment properties. Primary residence? Usually no reserve requirement. But having 3 to 6 months helps if other areas are weak. Compensating factors matter.
Don’t fit perfectly? We work with lenders who bend where banks break. Call (510) 589-4096. Got a 615 credit score? I have a lender. Self-employed with weird income? I have a lender. Recent job change? I have a lender.
Smart Strategies
Shop rates – We submit to 3 to 5 lenders simultaneously. Compare pricing and terms. Takes us maybe two hours. Saves you thousands. Why wouldn’t you?
Client last week. Wells Fargo quoted 6.75%. I got him 6.5% with a credit union lender. Same exact loan. $700k. That’s $110 monthly difference. $39,600 over 30 years. Two hours of work saved him a new car’s worth of money.
Optimize PMI – Different lenders use different PMI companies. Costs vary wildly. Some remove PMI easier than others. Some require full appraisal at 20% equity. Others use automated valuation. Some remove at 20%. Others make you wait for 22%.
MGIC versus Radian versus Essent versus Arch. All different pricing. All different removal policies. This stuff matters.
Match guidelines – Lenders add different overlays. We find the one that fits your situation. Self-employed? Some lenders are strict. Others are reasonable. Recent credit issues? Some lenders care. Others don’t.
Balance speed versus price – Best rate might take 45 days. Faster close might cost 0.125% more. Your call. Hot market with multiple offers? Pay the 0.125% for a 21-day close. Slow market? Take 45 days and save the money.
Conforming vs Other Loans
Conforming vs FHA:
- Higher credit needed (620 vs 580)
- No upfront mortgage insurance premium
- PMI removable once you hit 20% equity (FHA MIP is permanent)
- Slightly more down (3 to 5% vs 3.5%)
Credit under 620? Call us. We work with alternative programs. (510) 589-4096.
Conforming vs VA:
- Down payment required (VA is zero down)
- PMI under 20% (VA has no PMI)
- Everyone qualifies (VA only for veterans)
Conforming vs Jumbo:
- Lower amounts (up to $1.2M vs unlimited)
- Government backed (jumbo uses private money)
- Standard guidelines (jumbo more flexible)
- Usually better rates
The Process
- Check loan type – Standard or high-balance based on your county and price
- Shop lenders – Submit to 3 to 5, compare rates and timelines
- Get pre-approved – Complete application with best lender
- Lock rate – Secure rate for 30 to 60 days while you house hunt
- Underwriting – Fannie Mae or Freddie Mac reviews your file
- Close – 30 to 45 days, you’re done
Why Conforming Wins
Reliable – Standard Fannie/Freddie rules. Predictable approvals.
Available – Every lender offers these.
Competitive rates – Government backing means best conventional pricing.
Flexible – Primary homes, second homes, investment properties all work.
PMI removal – Hit 20% equity, drop the insurance. FHA can’t do that.
Myths About Conforming Loans
“All conforming loans are the same” – Wrong. Rates vary 0.125% to 0.25% between lenders. Overlays differ.
“Need 20% down” – Nope. 3% works for first-time buyers.
“High-balance isn’t really conforming” – It is. Backed by Fannie and Freddie. Just higher limits for expensive counties.
“Strictest guidelines” – Standardized doesn’t mean strict. Plenty of flexibility exists.
Real Talk About California Conforming Loans
Here’s what 40 years in this business teaches you – conforming loans are boring in the best way possible. Predictable. Reliable. Competitive rates.
California’s a tough market. Median home price $850k. Average conforming loan $675k. Buyers need every advantage they can get.
Shopping five lenders on a $700k loan? Might find 6.5% at one lender, 6.625% at another, 6.75% at a third. We’re talking $4,435 monthly versus $4,505 versus $4,575.
First versus third option? $140 monthly difference. $50,400 over 30 years. Same borrower. Same day. Just different lenders.
This is what brokers do. Banks only show you their rate. We show you five rates. You pick.
Bottom Line
Conforming loans aren’t flashy. But they’re reliable. Standard or high-balance, $750k Central Valley home or $1.1M Bay Area property – these loans work.
Competitive rates. Standardized process. Broad lender availability. Flexible options.
Our job? Finding the conforming lender with best rates, terms, and service for your situation. Even with standardized Fannie/Freddie guidelines, the lender matters. The relationship matters. The overlay differences matter.
285,000 conforming loans close in California yearly. Representing 65% of all purchase loans. Most popular loan type by far. There’s a reason for that. They work.