QOTW & Conforming Loan Limits Cause Borrowers Confusion!

Just what is the conforming loan limit is on single-family homes and condos in Southern California?

It was raised last year to $729,750 in designated high-cost areas under the Economic Stimulus Act of 2008 -- has been a continued source of confusion because it varies throughout our region.

And for 2009 it changed again...

Under the previous federal rules it was simple. Fannie Mae and Freddie Mac couldn't buy loans larger than $417,000, the limit for conforming mortgages. Any loan greater than that was considered a riskier jumbo, or nonconforming, loan, and borrowers paid a higher interest rate on it.

For 2009, the revised maximum conforming limit is $625,500. And that's what it is for the Los Angeles-Long Beach-Santa Ana metropolitan area. But for the Santa Barbara-Santa Maria-Goleta area it's $603,750; for Oxnard-Thousand Oaks-Ventura, $598,000; and for San Diego-Carlsbad-San Marcos, $546,250.

Does this matter to consumers? Don't most lenders charge a higher interest rate on loans above the $417,000 limit that applies everywhere else anyway? Or does it just mean that at least money (even at higher rates) is available to borrowers seeking larger amounts?

The "expanded conforming" program that remains in place (even with a maximum limit of $625,500) is a good thing for at least some borrowers.

While the market is still adapting to the new program, it does seem at the moment that essentially, there are several "tiers" of costs for borrowers -- those to the $417,000 "true conforming," those for the tier between $417,000 and whatever the limit is in your area (expanded conforming), and that for "true jumbo" mortgages, those over the limit in effect.

Presently, borrowers below the $417k limit are finding rates in the low 5% range (30-year fixed); those in the "tweener" tier are finding rates somewhat higher than that (about 0.30 to 0.40 higher lately), and those in need of a "true jumbo" are seeing rates near 7%....

I hope this helps clear up some of the confusion!

IMPORTANT Market Update:

Following a brief dip into the 4.75% range last week, rates (as expected) went back up to 5% and now, at least for the moment, appear to be touching historical lows once again. If you are still sitting on the sidelines waiting to take advantage of this opportunity, make sure that you have an application in process (www.silverstarfinance.com/fitness), a pre-approval from me, and an appraisal in hand or at least ordered. Some lenders are taking as long as 30 days to underwrite loans! Why? Consolidation in the lending industry, understaffed banks due to cost cutting measures, and a huge increase in loan submissions due to the historical low rates have caused massive amounts of volume with half the staff to work on them. Priority #1 are purchase transactions due to contractual close dates, then come refinances, and then come pre-approvals to purchase new homes, in that order. This means that if you are looking to refinance you should get your loan into underwriting, even if it means that we are not ready to lock the loan. The math is simple. If rates hit the point in which it makes financial sense for you to refinance, we cannot lock for 30 days knowing that we haven't even begun the information gathering process yet.  This means that rates would need to come down even further so that you could lock for 45 or 60 days. While yes, this may happen, you are much better off locking for 30 once you have your file in line for underwriting, that way your chances of closing within the lock period are drastically increased.  Don't procrastinate....inquire today!

Have a Fantastic Week!

Warmest regards,

Kurtis Kooiman, CMPS, CMP
Certified Mortgage Planning Specialist
Silverstar Finance, Inc.
Society of Financial Awareness
Kurtis's Active Rain
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Bus: (714) 892-1002 Ext. 313
Fax: (714) 892-1092

Parting Thought: There is a law in psychology that if you form a picture in your mind of what you would like to be, and you keep and hold that picture there long enough, you will soon become exactly as you have been thinking. Start by surrounding yourself with the right Team of Trusted Advisors to help you on your journey.