Are you in the market for a luxury home in the Greater Pasadena area? If so, you need to be aware that effective September 30th of 2011, High Balance Loan Limits that have been in effect for awhile now will expire.
What does this mean for you? It means that you will have to get a JUMBO loan to finance your new home. This means higher interest rates and tighter qualifying guidelines.
My personal lender, Mondie Pic'l of Prime Lending says the following:
Luxury home buyers that were previously elgibile for the high loan limits will now have to qualify using Jumbo product guidelines and rates. This will typically mean a higher rate, at least a 20% down payment and tougher qualifying criteria. The biggest issue with the Jumbo loans offered is that they require the home buyer to have large reserves in the bank after closing over and above the cost to purchase their home. In addition to needing more for a down payment (lower loan to value) they will have to have more overall asset verified to meet the reserve requirements. Some lenders are requiring as much as a 10%of the loan amount in reserve with all the funds being liquid (no retirement asset used).
New loan limits have been published and for our local counties they are as follows:
Los Angeles $625,500
Orange $675,500
San Bernardino $417,000
Riverside $417,000
Ventura $598,000
San Diego $546,250
The conventional conforming limits will remain the same at $417,000. Let's take a look at average sales home prices for June of 2011:
- South Pasadena - $899,967
- San Marino - $1,638,200
- Pasadena - $862,500
- Arcadia - $1,023,672
As you can see an average priced home in the neighborhoods above, will easily put you in the $800,000 price range. Let's take a look at the example below of what it means to finance an $800,000 home today:
$800,000 Purchase Price
$640,000 Loan Amount
$160,000 Down Payment
$ 64,000 Liquid Reserve Required
$224,000 Liquid Asset required to qualify (checking, savings, stocks, bonds)
Jumbo guidelines will vary greatly from lender to lender as these are private investors who each set their own qualifying criteria. It will be important for home buyers to shop around when applying for these loans to make sure they find a lender whose guidelines fit their financial profile.
So, if you are looking for a home in the $650,000 price range or above, you will be better off financially to find it and close escrow by end of September.
Remember that 1% rise in interest rates means 10% decline in affordabililty!
Questions? Call me at (626) 629-8439
Originally posted on my blog - PasadenaCARealEstateHomes.com
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