There have been a lot of blogs lately about mandatory 20% down payments, QRM, and increases in FHA minimum down payment requirements.
There have been some lively and heated debates on the subject. While I commented and stuck my two cents in, for the most part it's moot in the Manhattan market.
Manhattan is an expensive market, it's also a market with high-paying jobs and high incomes. It is also a market with 50% of transactions all cash. Short sales, foreclosures, sub prime, REO, FHA not terms we're very concerned with.
Buyers here have always had skin in the game. A minimum 10% down for a condo and a minimum 20% down for a coop in addition to good income, assets and credit. Quality buyers buy quality real estate.
Real Estate is Local!
This post is for buyers and sellers in Manhattan, those fortunate to be in the Manhattan market that has avoided the worst of the housing crises. This post is about the end of High Balance Conforming loans in expensive housing markets such as Manhattan.
For buyers that need financing, if you've been waiting now is the time. After October 1st 2011 it may cost you $100,000 more.
A few years ago after the financial meltdown, congress passed an emergency bill that raised the limits on conforming loans in expensive housing markets like NYC (Manhattan) as a temporary emergency.
We are still an expensive housing market but the temporary high limit ends October 1, 2011.
Currently the “temporary” limit on these loans is $729,750. This means that if you put 20% down on a $900,000 home, you can get a conforming loan in the amount of $720,000.
Effective October 1, 2011 this temporary legislation expires and is not expected to be extended. In October the amount will be lowered to $625,500 for a High Balance Conforming Loan.
What does that mean to Manhattan buyers? If you buy the same $900,000 home and put 20% down, your loan will now be considered a Jumbo loan. Rates on Jumbo loans are usually 1-1.5% higher, so if today you could get that loan today at 5% your payment would be $3865.12. The same loan amount using the Jumbo rates would be 6-6.5%, bringing your payment to $4550.89.
Over 30 years, that totals over $246,000! The other option would be to put a larger down payment on the property, about $100,000 more.
If you've been thinking about buying and selling?
Now is a rare moment in time to buy and sell in Manhattan.