Conventional Loans in California

California Conforming Loan Limits (2025)

The conforming loan limit for all California counties is $1,209,750 for a single-family home, set by the Federal Housing Finance Agency (FHFA). This is the maximum loan amount — not the purchase price. With 5% down, you can purchase a home up to $1,273,421. Multi-unit limits are $1,548,975 for duplexes, $1,872,225 for triplexes, and $2,326,875 for fourplexes. Loans above these amounts require jumbo financing. California's limit is the highest tier nationwide because every county qualifies as a high-cost area under the FHFA's pricing model, which sets the ceiling at 150% of the national baseline of $806,500.

Private Mortgage Insurance (PMI) on Conventional Loans

PMI is required when your down payment is less than 20% of the purchase price. The cost ranges from 0.2% to 1.5% of the loan amount annually, depending on your credit score, down payment percentage, and loan amount. A 740-credit borrower putting 10% down on a $900,000 home (loan of $810,000) pays approximately $135 per month in PMI. A 680-credit borrower in the same scenario pays approximately $340 per month — demonstrating why credit score optimization before applying saves significant money.

The key advantage of conventional PMI over FHA mortgage insurance is cancellability. PMI is automatically removed when your loan balance reaches 78% of the original purchase price. You can also request removal at 80% — either through natural paydown or by ordering a new appraisal showing appreciation has pushed your equity above 20%. In California's appreciating markets, many borrowers reach the 20% equity threshold through appreciation alone within two to four years, making conventional loans significantly cheaper than FHA over the loan's lifetime.

Conventional Loan Programs for Low Down Payments

Two Fannie Mae and Freddie Mac programs offer 3% down payment options for first-time buyers. HomeReady (Fannie Mae) allows household income up to 80% of the area median income (AMI) — in high-cost California metros, the AMI is high enough that many middle-income borrowers qualify. HomeReady also allows rental income from an accessory dwelling unit (ADU) or boarder to count as qualifying income, and permits non-occupant co-borrowers. HomePossible (Freddie Mac) has similar income limits and allows sweat equity for the down payment on renovation properties.

Standard conventional loans with 5% down are available to repeat buyers with no income limits. At 10% down, PMI rates drop significantly. At 15% down, PMI rates are minimal. At 20% ($170,000 on a median-priced California home), PMI is eliminated entirely. There is no single correct answer — the optimal down payment depends on your cash reserves, investment alternatives, and how long you plan to stay in the home. Your broker should model multiple scenarios showing the total cost of each down payment percentage over your expected ownership period.

Conventional Loan Credit Score Tiers

Conventional loan pricing uses a matrix called Loan-Level Price Adjustments (LLPAs) that modifies the interest rate based on credit score and loan-to-value ratio. The tiers create meaningful cost differences. A 760+ credit score with 25% down receives the best available rate — call this the baseline. At 740-759, rates are 0.125% higher. At 720-739, approximately 0.25% higher. At 700-719, approximately 0.5% higher. At 680-699, approximately 0.75% higher. At 660-679, rates may be 1.0% or more above the baseline. On a $800,000 loan, each 0.25% rate increase adds approximately $133 per month or $47,800 over 30 years.

This tiered pricing means that small credit score improvements before applying can save substantial money. Moving from 719 to 720, or from 739 to 740, crosses LLPA thresholds that reduce the rate. Common strategies include paying credit card balances below 30% utilization (ideally below 10%), disputing any errors on your credit reports, becoming an authorized user on a family member's established card, and avoiding any new credit inquiries in the 90 days before applying. A licensed broker can pull your credit and advise specifically on which actions would improve your score the most in the shortest time.

Last updated: July 2026. Sources: Federal Housing Finance Agency (FHFA) 2025 conforming loan limits. Fannie Mae Selling Guide for HomeReady and LLPA matrices. Freddie Mac Seller Guide for HomePossible. California Association of Realtors median home price data.

Frequently Asked Questions — Conventional Loans