2021 Loan Limits for Riverside County
Loan limits are one of the biggest and most important aspects that can affect your ability to purchase a home. The loan limits are updated on a yearly basis based on housing prices and therefore it’s important to know what they are currently before you start searching for a home. I’ve compiled information regarding the new and updated limits for the various types of loans.
FHA Loans
FHA loans are mortgages that are federally backed and have requirements set by the federal government. These loans are typically best for people with lower credit scores (under 700). FHA loans do have more strict requirements, such as mortgage insurance, property standards, and the purchased home MUST be the borrowers’ primary residence.
Loan limits on FHA mortgages for single-family residences have gone up as home prices continued rising during 2020. In Riverside County, the limit has gone up $11,500 since 2019 and will likely keep going up as the home prices rise higher and higher. Keep in mind that FHA loan limits are lower than conforming (conventional) due to the fact that these are government-backed mortgages.
For Riverside County, the updated 2021 limit is $477,250 for single-family homes. See the graph below for the loan limits on multi-family properties.
Conforming Loans
Conforming (or conventional) loans are mortgages that are not backed by the government and are given out by private lenders. These loans do tend to have more strict requirements for qualification, such as higher credit scores and better debt to income ratios. However, these loans can require a slightly lower down payment and a better interest rate as well as other added benefits. Conventional loans are normally best-suited for borrowers with good credit (700 or higher) and they do not require mortgage insurance with a 20% or higher down payment.
The loan limit on single-family homes for conforming loans is now at $548,250 for the 2021 year. This is $63,900 more than it was in 2019 and $37,850 more than it was in 2020 when the limit was $510,400. Because these numbers can change so drastically from one year to the next it’s very important to know the limits before you start searching for a home in 2021. Though you will most likely have plenty of options because the average single-family home in Riverside County cost $467,000 as of December 2020.
See the graph below for the 2021 loan limits on multi-family dwellings.
VA Loans
VA loans do not necessarily have loan limits like FHA and conforming. However, you must be an active or retired service member to qualify for this type of loan. If you are able to qualify, VA loans often allow for $0 down financing. These loans are issued by private lenders and partially backed by the Department of Veteran Affairs. These loans can be used for the purchase of a new property or to refinance an existing mortgage.
Prior to the Blue Water Navy Vietnam Veterans Act of 2019 VA loans were somewhat subject to the loan limits for conforming loans. The borrower could potentially borrow above the limit but typically had to pay 25% of the difference as the down payment. Now, this has changed, because of that act new VA loans are no longer subject to any limits. It is up to the lender to decide how much a borrower can afford based on their income and what the home appraises for.
For more information on the details and requirements of obtaining a VA loan please visit https://www.benefits.va.gov/homeloans/.
Jumbo Loans
Jumbo loans are mortgages that are larger than the standard loan limit for conventional and FHA Loans. These loans are given out by private lenders and are quite a bit more strict regarding qualifications due to the large amount being loaned. They typically require at least a 10 to 20% down payment and a thorough look at your debt to income ratio as well as your cash reserves or “ Money in the Bank”.
These loan types do not technically have any loan limit. The amount a lender is willing to loan you is based on your financial stability and ability to pay back the loan. The interest rate and down payment amount will vary based upon your financial situation, the area you live in, and many other factors. If you are considering this type of loan you should take the time to shop around and find the best lender in your area for this type of loan.
Why is all of this important to know?
Especially for first-time homebuyers who don’t have much capital, it is beneficial to know the maximum limit before browsing. In Riverside County, there are plenty of homes well within these limits in great areas. However, you should always know the limits so you do not set your heart on a home that is out of reach.
Next steps
1. Get pre-qualified
This is a fundamental first step and will help you discover how much house you can actually afford. Find a reputable lender and they will look at your credit, income, and other financial factors to give you an estimate of how much you may be loaned.
2. Get pre-approved
Having a pre-approval letter in-hand shows sellers and real estate agents that you are serious about purchasing a home and you know exactly how much you can afford. To obtain this, the lender will do a deeper dive into your financial records and verify all of the information in order to give you an exact amount that they are willing to lend you.
3. Put in an offer
Once you have a pre-approval letter in hand and you and your real estate agent have located the perfect home it’s time to put in an offer! It is very important that you have a Realtor who understands the requirements and property standards for all the different types of loans. A great agent will help you find a home that fits all the requirements then craft an offer and negotiate a contract.
Pro tip:
In this market where inventory is low and there are almost always multiple offers on a home in the first few days, it’s important to keep a few things in mind. A good amount of homes are now selling for $10,000- $25,000 over the sales price. Because of this, releasing appraisal contingencies has become somewhat commonplace. If you can afford to pay the amount above what the home will be appraised for, this will give you a higher chance of getting your offer accepted. When a seller has 5 to 10 offers on the table they are more likely to accept an offer with the least amount of contingencies possible. We are in a bit of a tough market for buyers so it’s a good idea to speak with your real estate agent and craft the most attractive offer possible.
Thank you for reading my blog, I hope you found his information helpful. I am a licensed Real Estate Agent and specialist in the Temecula Valley and surrounding area. If you have any questions regarding the Temecula housing Market or Real Estate in general please contact me.
My direct number is 949-291-9401 and my email is [email protected].
