As home prices continue to rise in Southern California, so will the amount of money you can borrow.

Federal borrowing limits were increased for the first time in more than a decade last week because of rising home prices across the nation. The Federal Housing Financing Agency had capped the baseline loan limit since 2006 as home prices dropped during the recession.

The new rates, used for conforming loans acquired by Fannie Mae or Freddie Mac, will take effect Jan. 1. In general, federally backed loans allow for smaller down payments and, theoretically, help more people enter the home market.

In San Diego County, loan limits for a typical single-family home will be $612,950, up 6 percent from where they are now. Those limits are higher than the national baseline of $424,100.

Similar changes took place throughout the area. Los Angeles County’s limit for a single-family home was lifted to $636,100 and Riverside County to $424,100, both up 1.7 percent from now.

San Diego County’s home prices have risen the most of the three counties in the last year, in part reflected in the new higher mortgage limit.

Kurt Branstetter, a senior loan officer in San Diego and branch manager at Nova Home Loans, said Fannie Mae and Freddie Mac loans can also be more lenient in terms of debt-to-income ratios and asset reserve requirements.

“I don’t see any downside to it,” he said of higher limits. “It will create additional buyers for home prices in the $610,000 to $700,000 price range.”

Branstetter said some Fannie Mae programs allow for a 5 percent down payment, lower than what is currently offered by jumbo loans, or loans that exceed limits established by the federal government.

Source: sandiegouniontribune.com