Remember, the conventional loan limit and FHA loan limit were both just raised to $729,750. However, there are now three tiers of loan rates: the old conventional loan limit up to $417,000, $417,001 up to the new limit of $729,750 and then $729,751 on up. The original intent was to expand the lower interest rates of conventional loans to higher ranges in areas with much higher prices, like Orange County. Historically, major changes in federally backed loan programs were carefully put together for the better part of a year. This time, the financial industry was given about a month to create and implement a significant change. The credit markets are just now adapting to the new loans. Part of that adaptation is the three tier system. Until the entire secondary market becomes more comfortable with these changes, the discrepancy in interest rates between each tier will be sizeable. There is about a three-quarter point differentiation between each tier. As the market adapts to the new program and liquidity is restored in the financial markets with investors once again purchasing pools of loans, the discrepancy between the tiers will shrink to about a quarter of a point. The experts are predicting that there will be considerable improvement by the end of the third quarter of this year, by the end of the summer. Currently, for loans above $729,750, the interest rates, loan qualifications and down payment requirements are extreme barriers to entry. That does not bode well for homes priced above $800,000, where the rate is approximately 1.5% above the $417,000 rate. This has impacted the upper range dramatically. All ranges above $1 million are experiencing market times above ten months; the higher the range, the higher the expected market time. Not surprisingly, the areas in Orange County that are impacted with market times above ten months are Corona Del Mar, Coto de Caza, Laguna Beach, Newport Beach and Newport Coast. These areas should all improve by the end of the summer with improvements in the financial markets.
;)
;)
