San Diego 2026 Conforming Loan Limit Increases to $1,104,000: Jumbo Threshold Rise Expands Buyer Pool for High-Value Coastal Construction

On November 25, 2025, the Federal Housing Finance Agency (FHFA) announced a significant increase to San Diego County's conforming loan limits for 2026, raising the high-balance ceiling to $1,104,000 for single-family homes—a $26,450 increase from the 2025 limit of $1,077,550. This seemingly modest adjustment carries profound implications for coastal San Diego real estate markets, particularly in Pacific Beach (including Tourmaline Surfing Park in the north), La Jolla, Mission Beach, and Bird Rock, where median home prices have historically pushed buyers into jumbo loan territory with its stricter requirements and higher costs.

For builders, contractors, and homeowners planning high-value construction or remodeling projects in these coastal communities, the expanded conforming loan limit represents a critical market shift. Properties previously accessible only through jumbo financing—with its demanding 20% down payments, 700+ credit score requirements, and 6-12 months of cash reserves—can now be purchased with conforming loans offering just 5% down, 620 minimum credit scores, and interest rates that run 0.35-0.55% lower than jumbo alternatives. This translates to an expanded buyer pool, improved purchasing power, and new opportunities for construction projects in the $900,000 to $1,162,100 price range.

This comprehensive guide examines exactly how San Diego's new conforming loan limits create opportunities for builders and buyers in coastal markets, breaking down the numbers, comparing financing options, and providing actionable insights for leveraging these changes in 2026.

What Changed: FHFA Raises San Diego Conforming Limit to $1,104,000

The Federal Housing Finance Agency's November 25, 2025 announcement established new conforming loan limits for mortgages that Fannie Mae and Freddie Mac will acquire in 2026. According to the FHFA, these increases reflect a 3.26% average increase in house prices between the third quarters of 2024 and 2025, as measured by the nominal, seasonally adjusted, expanded-data FHFA House Price Index.

For San Diego County, classified as a high-cost housing market, the changes are substantial:

2026 High-Balance Conforming Limits (San Diego County):

• Single-family (1-unit): $1,104,000 (up from $1,077,550 in 2025)
• Duplex (2-unit): $1,413,000
• Triplex (3-unit): $1,707,300
• Fourplex (4-unit): $2,121,600

2026 Baseline Conforming Limits (National Standard):

• Single-family (1-unit): $832,750 (up from $806,500 in 2025)
• Duplex (2-unit): $1,065,500
• Triplex (3-unit): $1,288,750
• Fourplex (4-unit): $1,601,650

The practical impact becomes clear when calculating maximum purchase prices with minimum down payments. With the high-balance limit of $1,104,000 and a 5% down payment, San Diego buyers can now purchase properties priced up to approximately $1,162,100—a significant expansion from the previous $1,134,263 maximum. Using the baseline limit of $832,750 with a 3% down payment (available to first-time homebuyers), the maximum purchase price reaches $858,500.

According to SD Housing Market, mortgage lenders in San Diego began accepting applications under these new limits immediately upon the FHFA announcement, meaning the expanded financing became available nearly six weeks before the official January 1, 2026 effective date. This early implementation gave savvy buyers and builders a head start in positioning properties and construction projects to capitalize on the expanded limits.

Why This Matters for Pacific Beach, La Jolla, and Mission Beach Buyers

The conforming loan limit increase arrives at a critical moment for San Diego's coastal real estate markets. Current median home prices demonstrate why this change matters:

Current Median Home Prices (January 2026):

• La Jolla (from Bird Rock through La Jolla Shores to La Jolla Village): $2,400,000 - $2,800,000 (varying by subarea)
• Mission Beach (oceanfront properties along the boardwalk): $1,990,000
• Pacific Beach: $1,300,000
• Bird Rock: $2,100,000 - $2,140,000

While these medians remain well above the conforming limit, they mask significant market segments that fall within or near the expanded threshold. In Pacific Beach specifically, from Tourmaline Surfing Park in the north to Pacific Beach Drive in the south, the $1.3 million median reflects a mix of beachfront properties along Crystal Pier and the boardwalk, bayfront homes near Sail Bay, inland properties along the Garnet Avenue corridor, and condominiums throughout the community, with a substantial inventory existing in the $900,000 to $1,200,000 range—precisely the segment most impacted by the conforming limit increase.

For construction and remodeling projects, the implications are even more pronounced. A homeowner planning a $300,000 to $400,000 renovation on a property purchased at $700,000 to $800,000 now has a post-construction value firmly within conforming loan territory. Previously, this same scenario would have pushed the property into jumbo financing requirements, limiting the pool of potential future buyers.

Bird Rock, positioned as a transitional neighborhood between Pacific Beach and La Jolla, presents a particularly interesting case for the expanded conforming limits. With median prices in the $2.1M range, Bird Rock properties rarely fall within the $1,104,000 conforming threshold outright. However, buyers willing to contribute 30-40% down payments can finance Bird Rock purchases with conforming loans, accessing better rates and terms than comparable jumbo financing. For builders working on remodels or smaller new construction projects in Bird Rock's inland areas, positioning properties in the $1.4M-$1.6M range with anticipated buyer down payments of $300K-$500K allows buyers to benefit from conforming financing advantages.

The conforming loan expansion also addresses a critical affordability challenge in coastal San Diego. According to Redfin, Pacific Beach median sale prices have declined 4.3% year-over-year, suggesting market softness that the expanded financing options can help counteract by bringing more qualified buyers into the market. When coupled with current conforming loan rates averaging 6.11% for 30-year fixed mortgages in California (compared to jumbo rates of 6.40-6.45%), the monthly payment savings become substantial.

For a $1,100,000 loan:

• Conforming rate at 6.11%: $6,664 monthly payment (principal & interest)
• Jumbo rate at 6.45%: $6,917 monthly payment (principal & interest)
• Monthly savings: $253
• Annual savings: $3,036
• 30-year savings: $91,080

These savings directly translate to increased purchasing power, enabling buyers to afford higher-value homes or allocate more budget toward construction upgrades, premium finishes, or energy-efficient features that builders can market as value-added differentiators.

Conforming vs Jumbo Loans: The Real Cost Difference at $1M+

Understanding the specific advantages of conforming loans versus jumbo financing reveals why the $1,104,000 threshold matters so significantly for both buyers and builders marketing high-value construction projects.

Down Payment Requirements:

Conforming loans offer substantially lower down payment options:

• First-time buyers: 3% minimum ($33,150 on $1,104,000)
• Repeat buyers: 5% minimum ($55,200 on $1,104,000)
• Investment properties: 15-20% depending on lender

Jumbo loans demand significantly more upfront capital:

• Minimum: 10-20% ($110,400 - $220,800 on $1,104,000)
• Competitive rates: Often require 20-25% ($220,800 - $276,000)
• Super jumbo (>$2M): Frequently 25-30%

For builders, this 15-17 percentage point difference in down payment requirements translates directly to buyer pool expansion. A buyer with $75,000 saved can afford a conforming loan up to $1,104,000 (at approximately 7% down), but would be limited to a jumbo loan of just $375,000 to $500,000 depending on lender requirements.

Credit Score Requirements:

The qualification threshold gap is equally significant:

Conforming loans:

• Minimum credit score: 620 (though rates improve substantially above 680)
• Optimal rates: 740+
• Some programs: Accept scores as low as 580 with compensating factors

Jumbo loans:

• Minimum credit score: 680-700 depending on lender
• Competitive rates: 720-740+
• Large jumbo loans (>$2M): Often require 760+

Debt-to-Income Ratio:

Conforming loans permit higher DTI ratios, making qualification more accessible:

• Standard maximum: 43-45%
• With compensating factors: Up to 49-50%
• Automated underwriting: May approve higher ratios with strong credit

Jumbo loans impose stricter limits:

• Typical maximum: 43%
• Preferred range: 36-38%
• Large jumbo: Often capped at 40% regardless of other factors

Cash Reserves:

Conforming loans rarely require significant reserves:

• Primary residence: 0-2 months typically
• Investment property: 3-6 months
• Strong credit profile: Often waived entirely

Jumbo loans demand substantial liquid assets:

• Minimum: 6-12 months of mortgage payments
• Large jumbo: 12-24 months
• Multiple properties: May require reserves for all mortgages

For a $1,104,000 jumbo loan with a $6,917 monthly payment, 12 months of reserves means demonstrating $83,004 in liquid assets beyond the down payment and closing costs—a prohibitive requirement for many otherwise qualified buyers.

Underwriting Process:

Conforming loans benefit from standardization and automation:

• Automated underwriting systems (Fannie Mae DU, Freddie Mac LPA)
• Standardized documentation requirements
• Faster approval timelines (often 2-3 weeks)
• More lender competition driving better terms

Jumbo loans require manual underwriting:

• Individual underwriter review of all documentation
• More extensive documentation (often 2 years of tax returns, asset statements, employment verification)
• Longer approval timelines (3-4 weeks or more)
• Fewer lenders offering competitive programs

These fundamental differences mean that properties priced just below the $1,104,000 conforming limit can attract a dramatically larger buyer pool than properties requiring jumbo financing—even if the price difference is minimal. For builders, this creates a strategic pricing opportunity for new construction and major remodels.

Multi-Unit Properties: Expanded Financing for Duplexes, Triplexes, Fourplexes

The 2026 conforming loan limit increases extend beyond single-family homes to include substantial expansions for multi-unit properties—an often-overlooked opportunity for builders and investors in coastal San Diego markets where lot values encourage maximum density.

2026 San Diego Multi-Unit Conforming Limits:

These limits create compelling opportunities for construction projects on larger lots in Pacific Beach, particularly in areas where R-3 and R-4 zoning permits multi-unit development. The income-generating potential of multi-unit properties provides additional qualification benefits that single-family loans don't offer.

Rental Income Qualification:

Conforming multi-unit loans permit borrowers to use 75% of actual or projected rental income to qualify for the mortgage, even if the property isn't yet generating rent. For a duplex generating $4,000/month in rental income from one unit while the owner occupies the other:

• Eligible rental income for qualification: $3,000/month ($4,000 × 75%)
• Annual qualifying income added: $36,000
• Impact on DTI ratio: Substantial improvement in qualification capacity

This feature makes multi-unit construction projects particularly attractive to buyers who might not otherwise qualify for the purchase price, expanding the potential buyer pool for builders developing 2-4 unit properties.

Strategic Construction Opportunities:

The expanded multi-unit limits align well with several current Pacific Beach and coastal San Diego market dynamics, particularly in Pacific Beach's R-3 and R-4 zoned areas near the commercial corridors, La Jolla's limited multi-unit opportunities in Bird Rock, and Mission Beach's beachfront areas where vertical density is increasingly valuable:

1. ADU Conversion Projects: Properties with existing ADUs (Accessory Dwelling Units) that create a duplex configuration can now access up to $1,413,000 in conforming financing, compared to the single-family limit of $1,104,000. This $309,000 difference rewards properties that have invested in ADU construction.
2. Lot Assemblage: Two adjacent lots purchased and developed as a single duplex property can access nearly $1.5 million in conforming financing, making previously marginal development projects financially viable.
3. Vertical Development: In areas where zoning permits, converting a single-family lot to a triplex or fourplex unlocks access to $1.7 million to $2.2 million in conforming financing—often sufficient for full ground-up construction even at coastal California construction costs.
4. Value-Add Remodels: Older multi-unit properties requiring substantial renovation can be financed under conforming limits up to $2.1 million, making fix-and-flip or fix-and-hold investment strategies more accessible to a broader investor pool.

For builders specializing in multi-unit construction, the marketing advantage is clear: a property that qualifies for conforming financing can be advertised with lower down payment requirements, better interest rates, and easier qualification than competing properties requiring jumbo loans. In a market where Pacific Beach median prices declined 4.3% year-over-year according to Redfin, this financing edge can be the differentiator that drives sales velocity.

How Builders Can Market to the Newly-Accessible Buyer Pool

The conforming loan limit expansion creates a specific, identifiable buyer demographic that builders can target with precision: qualified borrowers who were previously excluded from the $1M+ market by jumbo loan requirements but can now access conforming financing.

Identifying the Expanded Buyer Pool:

This demographic typically exhibits:

• Household income: $150,000 - $250,000
• Credit scores: 640-700 (conforming eligible, jumbo excluded)
• Cash savings: $60,000 - $100,000 (sufficient for 5-7% down, insufficient for 20% jumbo requirement)
• Debt-to-income ratio: 40-48% (conforming acceptable, jumbo restrictive)
• First-time move-up buyers or coastal market newcomers seeking properties from Tourmaline to Mission Beach

According to Conventional Loan Requirements data, these buyers can now access properties they were systematically excluded from just months ago. The key is understanding and communicating the specific advantages your construction project offers this demographic.

Marketing Messages That Resonate:

1. "5% Down Gets You In" - Lead with the down payment advantage. For a $1,100,000 new construction home, emphasize the $55,000 down payment versus the $220,000 jumbo requirement. This $165,000 difference is money buyers can retain for furniture, landscaping, or emergency reserves.
2. "Lower Rates, Lower Payments" - Quantify the monthly savings. At current rates (conforming 6.11% vs jumbo 6.45%), a $1,100,000 loan saves $253/month or $91,080 over 30 years. Market this as "Save the equivalent of a Tesla Model 3 over the life of your loan."
3. "Qualify with Confidence" - Address the easier underwriting directly. "Most buyers with 640+ credit scores and stable employment qualify for conforming financing—no extensive asset documentation or 12-month reserve requirements."
4. "Smart Pricing Below the Jumbo Threshold" - Position properties at $1,050,000 - $1,150,000 as strategically priced to maximize buyer accessibility. A home priced at $1,095,000 with 5% down ($54,750) requires a $1,040,250 loan—comfortably within conforming limits and accessible to thousands more buyers than a $1,195,000 property requiring jumbo financing.

Digital Marketing Tactics:

Target your online advertising to capture conforming-eligible searchers:

• Google Ads keywords: "homes under $1.1 million Pacific Beach," "conforming loan Pacific Beach," "5% down La Jolla," "Tourmaline area homes," "north Pacific Beach financing"
• Facebook/Instagram demographics: Age 32-48, household income $150k-$250k, interests in coastal living, architecture, renovation
• SEO content: Create detailed guides on "How to Buy a $1M+ Home with Just 5% Down in Pacific Beach" that establish your expertise while capturing high-intent organic traffic

Partnerships with Mortgage Professionals:

Develop referral relationships with local mortgage brokers who specialize in conforming loans. Many lenders actively seek builders offering properties in the conforming-to-near-jumbo range ($850,000 - $1,150,000) because they can qualify more borrowers for these properties than for jumbo-only inventory.

Provide your mortgage partners with:

• Detailed property specifications and pricing
• Construction timelines and occupancy dates
• Pre-qualification guidance for buyers interested in your projects
• Co-marketing opportunities (builder-lender webinars, open house financing booths, educational seminars)

Demonstrating Value Through Comparable Analysis:

Position your construction projects against the broader market by showing buyers the financing advantage:

Example comparative marketing:
"Comparable New Construction Properties:
- Property A (Bird Rock coastal-adjacent): $1,295,000 - Requires jumbo loan, 20% down ($259,000), 6.45% rate
- Property B (Our Pacific Beach Project): $1,095,000 - Conforming eligible, 5% down ($54,750), 6.11% rate
- Monthly payment difference: $428 in buyer's favor
- Down payment savings: $204,250 retained capital
- Total first-year savings: $209,386"

This framing positions your project not as cheaper, but as smarter—offering equivalent or superior construction quality while preserving buyer capital and cash flow through superior financing access.

Real Numbers: What You Can Afford Under New Limits

Understanding exact purchasing power under the 2026 conforming loan limits helps both builders and buyers identify realistic project scopes and pricing strategies. Here's a detailed breakdown of affordability scenarios using current rates and conventional underwriting standards.

Scenario 1: First-Time Buyer with 3% Down

Profile:

• Household income: $180,000
• Credit score: 680
• Down payment available: $25,725 (3%)
• DTI ratio: 43%

Maximum conforming loan: $832,750 (baseline limit)
Maximum purchase price: $858,500

Monthly payment breakdown (6.11% rate):

• Principal & Interest: $5,048
• PMI (0.52% annually): $361
• Property taxes (1.25% annually): $895
• Homeowners insurance ($1,500/year): $125
• HOA (estimated): $200
• Total monthly payment: $6,629

Required annual income: $180,000 (assuming 43% DTI maximum)

This scenario captures entry-level buyers in the Pacific Beach condo market or inland Pacific Beach single-family homes. Builders developing projects in the $750,000-$850,000 range can market to this demographic with emphasis on low down payment accessibility.

Scenario 2: Move-Up Buyer with 5% Down

Profile:

• Household income: $225,000
• Credit score: 720
• Down payment available: $58,105 (5%)
• DTI ratio: 40%

Maximum conforming loan: $1,104,000 (high-balance limit)
Maximum purchase price: $1,162,100

Monthly payment breakdown (6.11% rate):

• Principal & Interest: $6,691
• PMI (0.46% annually): $423
• Property taxes (1.25% annually): $1,211
• Homeowners insurance ($2,200/year): $183
• HOA (estimated): $250
• Total monthly payment: $8,758

Required annual income: $225,000 (assuming 40% DTI ratio)

This represents the sweet spot for coastal Pacific Beach new construction—buyers with stable six-figure incomes who can access the $1M+ market through conforming financing but would be excluded by jumbo requirements.

Scenario 3: High-Income Buyer with 10% Down

Profile:

• Household income: $280,000
• Credit score: 760
• Down payment available: $120,000 (10%+)
• DTI ratio: 36%

Maximum conforming loan: $1,104,000 (high-balance limit)
Maximum purchase price: $1,227,000

Monthly payment breakdown (6.11% rate):

• Principal & Interest: $6,691
• PMI: $0 (waived at 10%+ down with excellent credit)
• Property taxes (1.25% annually): $1,278
• Homeowners insurance ($2,500/year): $208
• HOA (estimated): $300
• Total monthly payment: $8,477

Required annual income: $280,000 (assuming 36% DTI ratio)

This buyer can access properties slightly above the conforming purchase limit by contributing a larger down payment while still maintaining conforming loan status. This is ideal for La Jolla or Bird Rock projects where lot values and construction costs push pricing higher.

Scenario 4: Multi-Unit Investment Property

Profile:

• Household income: $200,000
• Credit score: 700
• Down payment available: $85,000 (5.7%)
• Rental income: $4,500/month (one unit)
• DTI ratio: 43%

Maximum conforming loan: $1,413,000 (duplex limit)
Maximum purchase price: $1,498,000
Rental income credited: $3,375/month (75% of $4,500)

Monthly payment breakdown (6.11% rate):

• Principal & Interest: $8,564
• PMI (0.52% annually): $612
• Property taxes (1.25% annually): $1,560
• Homeowners insurance ($3,000/year): $250
• HOA (estimated): $150
• Total monthly payment: $11,136
• Less rental income credit: -$3,375
• Net payment for qualification: $7,761

Required annual income: $200,000 base + rental income credit

This scenario demonstrates how multi-unit conforming limits enable buyers to access significantly higher-priced properties by leveraging rental income. For builders developing duplex, triplex, or fourplex properties in Pacific Beach, this is a powerful marketing angle: "Access a $1.5M property with the income requirements of a $1M single-family home."

Comparison Table: Conforming vs Jumbo Impact

These concrete numbers provide builders with specific talking points for sales conversations and marketing materials, demonstrating the tangible financial advantage of properties priced within conforming loan limits.

Timeline and Implementation: When Lenders Started Accepting Applications

Unlike many federal policy changes that experience delayed implementation, the 2026 conforming loan limit increases saw rapid adoption by San Diego mortgage lenders, creating immediate opportunities for builders and buyers prepared to act.

Official Announcement: November 25, 2025

The Federal Housing Finance Agency released its official announcement on November 25, 2025, establishing the new limits and confirming they would apply to all loans acquired by Fannie Mae and Freddie Mac on or after January 1, 2026.

Immediate Lender Implementation: Late November 2025

According to SD Housing Market and Community First Mortgage, San Diego mortgage lenders began accepting applications under the new conforming limits immediately upon the FHFA announcement—nearly six weeks before the official effective date. This early implementation reflected:

1. Lender Preparedness: Major lenders had anticipated the increases based on FHFA's methodology tied to the House Price Index, allowing them to update systems quickly.
2. Competitive Advantage: Lenders offering early access to expanded limits gained a competitive edge in capturing market share during the critical holiday and early-year home buying season.
3. Rate Lock Strategies: Buyers could lock conforming rates in late November/early December 2025 for closings scheduled in January-February 2026, potentially capitalizing on favorable rate environments.

Impact on Late 2025/Early 2026 Sales:

For builders with projects nearing completion in Q4 2025 or Q1 2026, the early implementation created unexpected sales opportunities. Properties priced in the $1,050,000 - $1,150,000 range that had been marketing to the jumbo-qualified buyer pool suddenly became accessible to conforming-eligible buyers six weeks earlier than anticipated.

This timing advantage particularly benefited:

• Spec homes under construction with projected Q1 2026 completion dates
• Recently completed inventory that had been slow to sell in the jumbo-only market
• Builders who could quickly pivot marketing messaging to emphasize conforming loan eligibility

Current Status: January 2026

As of January 2026, all major San Diego mortgage lenders have fully implemented the new conforming loan limits. Buyers applying today can expect:

• Conforming loan availability: All properties up to $1,104,000 (single-family) qualify for conforming financing terms
• Competitive rate environment: Current conforming rates averaging 6.11% for 30-year fixed mortgages
• Standard processing timelines: 3-4 weeks from application to closing for conforming loans
• Automated underwriting: Most conforming applications receive automated approvals within 48-72 hours of submission

Looking Forward: Rate Outlook for 2026

While conforming loan limits are now established for the full year, interest rates remain variable. According to California mortgage market forecasts, the January-February 2026 window represents an optimal period for buyers, with potential rate improvements of 0.125-0.25% from late 2025 levels. Builders marketing to rate-sensitive buyers should emphasize:

• The current rate advantage of conforming loans over jumbo products (0.34% spread)
• The potential for rate and term refinancing if rates drop later in 2026
• The opportunity cost of waiting versus securing property now while inventory remains elevated

For construction projects scheduled for mid-2026 completion, pre-sales and reservations made now can include rate lock provisions or builder-paid rate buydowns to provide purchasing certainty for buyers concerned about rate volatility.

Frequently Asked Questions

Can I use a conforming loan for an investment property in Pacific Beach?

Yes, conforming loans are available for investment properties, but requirements differ from primary residences. Investment property conforming loans typically require 15-20% down payment (versus 3-5% for primary residences), and interest rates run approximately 0.50-0.75% higher than owner-occupied rates. The $1,104,000 limit still applies, but you'll need stronger credit (typically 680+) and lower debt-to-income ratios (usually 36% maximum). For multi-unit properties (2-4 units) where you occupy one unit, more favorable owner-occupied terms apply even if you rent the other units.

What happens if I need to borrow $1,150,000—just above the conforming limit?

You have three options: (1) Increase your down payment to bring the loan amount under $1,104,000 (on a $1,150,000 purchase, this means putting down at least $46,000 or 4%), (2) Accept jumbo loan terms for the entire loan amount with their stricter requirements and higher rates, or (3) Consider a conforming first mortgage up to $1,104,000 with a small second mortgage or home equity line of credit for the additional amount needed. Option three can be complex and may not save money once you factor in the second loan costs, so option one (larger down payment) typically makes the most financial sense if you're close to the conforming limit.

How much does PMI cost on a high-balance conforming loan, and when can I remove it?

Private Mortgage Insurance (PMI) costs vary based on credit score, down payment percentage, and loan amount. For high-balance conforming loans in San Diego, expect PMI rates of 0.46-0.58% annually for 760+ credit scores, 0.52-0.75% for 700-759, 0.85-1.25% for 640-699, and 1.25-1.50% for 620-639. On a $1,104,000 loan with a 720 credit score (0.52% PMI rate), monthly PMI costs approximately $478. PMI automatically terminates when you reach 22% equity through payments, and you can request removal at 20% equity. On new construction that appreciates, this often happens within 3-5 years rather than the full amortization schedule.

Do I qualify for a conforming loan if I'm self-employed or have commission-based income?

Yes, self-employed borrowers and those with commission income can absolutely qualify for conforming loans, but documentation requirements are more extensive. You'll typically need to provide two years of personal and business tax returns (for self-employed), and lenders will average your income over a 24-month period. Variable income sources like commissions are averaged over 2 years and may be discounted if trending downward. The key is demonstrating stability and consistency. If your income varies significantly year-to-year, work with a mortgage professional to time your application during a period when your 24-month average is strongest. Many self-employed borrowers in Pacific Beach's tech sector and La Jolla's professional services industries successfully obtain conforming loans by planning ahead and maintaining organized financial documentation.

Can I use gift funds for my down payment on a conforming loan?

Yes, conforming loan programs allow gift funds for down payments from family members, with specific documentation requirements. The donor must provide a gift letter stating the funds are a gift (not a loan requiring repayment), and you'll need to document the transfer with bank statements showing the deposit. For loans with less than 20% down, at least 5% of the down payment typically must come from your own funds (not gifts) if you're a repeat buyer. First-time buyers can use 100% gift funds for their down payment on conforming loans. This makes conforming financing particularly attractive for multi-generational buyers in Pacific Beach and La Jolla, where parents or grandparents may contribute to down payments on coastal properties.

How does the conforming loan limit affect construction-to-permanent loans?

Construction-to-permanent loans (single-close loans that finance both construction and permanent mortgage) are available with conforming financing up to the $1,104,000 limit, but requirements are stricter than standard purchase loans. You'll typically need 20% down, detailed construction plans with builder contracts, and a qualified appraisal based on the completed value. The advantage: you lock your conforming rate at construction start rather than at completion, and you only go through one underwriting process and pay one set of closing costs. For custom builds in Pacific Beach—whether on larger lots near Kate Sessions Park, bayfront parcels near Sail Bay, or infill developments along Garnet Avenue—where buyers are purchasing lots and building new homes, construction-to-permanent conforming loans can save $8,000-$15,000 in duplicate fees compared to separate construction and permanent mortgages. Work with lenders experienced in construction financing, as not all conforming lenders offer these programs.

Will the conforming loan limit increase again in 2027?

The FHFA adjusts conforming loan limits annually based on changes in the national average home price, measured by the FHFA House Price Index. The 2026 increase of 3.26% reflected the average house price appreciation between Q3 2024 and Q3 2025. If home prices continue appreciating at similar rates through Q3 2026, the 2027 limits would increase proportionally—potentially to $1,140,000-$1,145,000 for San Diego high-balance loans. However, if prices stabilize or decline, limits could remain flat. The FHFA typically announces the following year's limits in late November, giving buyers and builders about six weeks' notice before implementation. For construction projects with 2027 completion dates, it's prudent to price properties assuming current limits while monitoring for potential increases that could expand your buyer pool.

Can I combine a VA loan with the high-balance conforming limit?

Yes, eligible veterans and active-duty military can use VA loans up to the conforming loan limits, though the VA program operates slightly differently. The VA doesn't set maximum loan amounts, but VA loans above the "basic entitlement" ($104,250) may require a down payment on the portion exceeding county conforming loan limits. In San Diego County, veterans with full entitlement can borrow up to $1,104,000 with zero down payment. VA loans offer exceptional terms: no PMI regardless of down payment, competitive interest rates typically 0.25-0.50% below conventional conforming rates, and more flexible credit and DTI requirements. For veteran buyers in Pacific Beach and coastal San Diego, VA loans represent the best financing option for properties under the conforming limit, often beating conventional conforming loans on both rate and total cost.

What documentation do I need to apply for a high-balance conforming loan?

Standard conforming loan documentation includes: (1) Two years of W-2s and most recent pay stub (employed borrowers) or two years of personal and business tax returns (self-employed), (2) Two months of bank statements for all accounts, (3) Photo ID and Social Security card, (4) Complete residential history for the past two years, (5) Authorization for credit report, (6) Purchase contract and property appraisal (ordered by lender), (7) Gift letter and documentation if using gift funds, (8) Explanation letters for any credit issues, employment gaps, or large deposits. High-balance conforming loans (between $832,750 and $1,104,000) may require slightly more documentation than baseline conforming loans, including verification of additional reserves (2-6 months) depending on credit score and down payment. Work with your lender early to organize documentation—complete, organized files can reduce processing time from 4 weeks to 2-3 weeks.

How does the conforming loan limit interact with San Diego's rental property market and ADU financing?

The conforming loan limit increase has particular significance for ADU (Accessory Dwelling Unit) investors and rental property buyers in Pacific Beach. Properties with legal ADUs that create a duplex configuration qualify for the 2-unit conforming limit of $1,413,000 rather than the single-family $1,104,000 limit—a $309,000 advantage. When qualifying, lenders can credit 75% of the ADU's projected rental income toward your debt-to-income ratio, even if the ADU isn't yet rented. For a Pacific Beach property with an 800-square-foot ADU renting at $2,800/month, you'd receive $2,100/month in qualifying income credit. This effectively reduces the income needed to qualify by $25,200 annually. For builders marketing properties with ADUs or buyers planning ADU construction, positioning the property as a duplex for loan purposes unlocks both higher conforming limits and income-based qualification advantages—a powerful combination in the current market.