Mortgage basics for Palo Alto buyers

Palo Alto prices change the mortgage conversation. The Almanac, citing MLSListings data, put the 2025 median single-family price at about $3.8 million. At that level the federal loan limits that shape most American mortgages barely apply. Buyers here typically need a jumbo loan, a very large down payment or both. The rules for those loans come from each lender rather than from Fannie Mae and Freddie Mac.

This page explains the loan limits for 2026, how rates and costs are quoted and which state programs exist. It is general information, not financial, tax or legal advice. We do not recommend lenders or brokers. Talk to licensed mortgage professionals, compare written offers and check licenses through NMLS Consumer Access. For the purchase steps, see buying a home. For prices, see home prices and the market.

The 2026 loan limits

A conforming loan is one small enough for Fannie Mae or Freddie Mac to buy. The Federal Housing Finance Agency sets the limits each year. On November 25, 2025, FHFA announced the 2026 values:

Limits for two, three and four unit properties are higher. FHFA publishes the full county list on its website. The Federal Housing Administration sets its own limits for FHA loans through HUD, so check HUD's lookup if you are considering an FHA loan. FHFA usually announces the next year's figures in late November.

A quick example shows why limits matter. On a $3 million house, a loan at the 2026 ceiling of $1,249,125 would mean a down payment of more than $1.7 million. Most buyers who borrow more than that use a jumbo loan.

Jumbo loans

A jumbo loan is any mortgage above the county limit. Because government-sponsored enterprises do not buy them, lenders keep them or sell them privately. That gives each lender room to set its own terms.

• Down payment. Lenders often want more than the minimums seen on conforming loans.
• Cash reserves. Many require months of payments held in savings or investments after closing.
• Income documentation. Expect close review of tax returns, pay stubs and asset statements.
• Equity compensation. Treatment of stock grants, RSUs and bonuses varies widely. Some lenders count vested stock as assets or income under set rules. Our guide to equity and stock options explains the basics.
• Pricing. Jumbo rates can be higher or lower than conforming rates depending on the lender and the market at the time.

Because terms differ so much, ask at least two or three lenders for written quotes on the same day. Banks, credit unions and mortgage brokers all write jumbo loans. Our banks and credit unions page lists local branches without ranking them.

How rates are quoted

Two offers with the same headline rate can cost very different amounts. Look at these pieces together.

1. Note rate. The interest rate on the loan, which sets the monthly principal and interest payment.
2. Points. Upfront fees, each worth 1 percent of the loan amount, paid to lower the rate. Lender credits work the other way: a higher rate in exchange for money toward closing costs.
3. APR. The annual percentage rate folds certain loan costs into a yearly figure. It is useful for comparing offers but assumes you keep the loan for its full term.
4. Lock period. A rate lock holds the quoted rate for a set number of days. Longer locks can cost more. Ask what happens if closing slips.
5. Loan type. A 30-year fixed rate stays the same for the life of the loan. An adjustable-rate mortgage, such as a 7/6 ARM, is fixed for an initial period and then adjusts on a schedule based on an index plus a margin, within caps.

National averages, such as Freddie Mac's weekly survey, are useful for spotting trends. They describe conforming loans for typical borrowers, not a jumbo loan on a Palo Alto house. Your own quote depends on credit, down payment, loan size, property type and points.

The Loan Estimate and Closing Disclosure

Federal rules standardize mortgage paperwork so you can compare offers.

• Loan Estimate. A lender must give you one within 3 business days after you apply. It shows the rate, monthly payment, closing costs and key features in a standard format.
• Closing Disclosure. You must receive it at least 3 business days before closing. Compare it line by line with the Loan Estimate and ask about any change.

Get Loan Estimates from several lenders for the same loan type and lock period. The standard format makes the comparison easy. The Consumer Financial Protection Bureau's home buying pages explain each section.

What goes into the monthly payment

Principal and interest are only part of the cost of owning in Palo Alto.

• Property tax. About 1 percent of the purchase price plus local bonds and parcel taxes, so a bit over 1 percent in all. New owners also get a supplemental tax bill that does not go through the lender. See property taxes and Prop 13.
• Homeowners insurance. Required by the lender. Earthquake and flood coverage are separate. See our home insurance guide and our flood zones page.
• Impound account. Some lenders collect tax and insurance monthly and pay the bills for you. California law limits when lenders can require this on some loans, so ask.
• Mortgage insurance. Conventional loans with less than 20 percent down usually carry private mortgage insurance. Under federal law it can be canceled on request once the balance reaches 80 percent of the original value and ends automatically at 78 percent, if payments are current.
• HOA dues. For condos and townhomes. See our condo guide.

CalHFA and other programs

The California Housing Finance Agency offers first mortgages and down payment help through approved private lenders. Programs have income limits and sales price limits. Many also require homebuyer education. Palo Alto prices put many homes above those limits, but condos and below market rate homes can fit.

Dream For All

Dream For All is CalHFA's shared appreciation loan for first-generation buyers. According to CalHFA's January 2026 announcement:

• Applications ran from February 24 to March 16, 2026, with selection by random draw.
• CalHFA expected $150 million to $200 million to be available for 2026.
• The loan covers up to 20 percent of the purchase price or appraised value.
• When the home sells, the state recovers the original amount plus a share of the appreciation.
• The income limit was about $309,000 in Santa Clara County.
• Applicants needed a pre-approval from a CalHFA approved lender. Recipients had 90 days to shop for a home.

Other options

CalHFA also offers deferred junior loans for down payment and closing costs alongside its first mortgages. Check current terms on CalHFA's site. For deed-restricted homes priced well below market, see our guide to below market rate housing. The city's purchase waitlist was closed as of June 2026.

Before you apply

Frequently asked questions