Lower Loan Limits Coming October 2011

Mortgage and Lending with Peoples Bank


At the beginning of the mortgage meltdown a couple of years ago, Congress enacted emergency legislation raising the limits on High Balance Conforming Loans.

These loans are designated "conforming," meaning lower interest rates and typically a slightly easier transaction to get approved and closed when compared to Jumbo (or non-conforming) financing. The High Balance variety is only available in designated high cost areas, like the San Francisco Bay Area.

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 the emergency legislation expires and is not expected to be extended. This lowers this High Balance Conforming Loan to $625,500.

So, what does that mean to you? 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 typically 1-1.5% higher, so if today you could get that loan for, say, 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, to the tune of nearly $100,000.

The important thing to note is that if you are looking for a loan to purchase a home, or refinance the one you already have, now is the time to move forward. The limit will remain at the higher point until the first of October, giving home buyers the spring and summer seasons to purchase a property before the high limits are gone.

To find out what the current loan limit is in your area, you can access the Fannie Mae website to see a county-by-county spreadsheet.

The higher limits have really helped people get into homes here in the Bay Area. Once those limits reduce, there will be fewer options for those trying to get into the real estate market. I've been talking to all my buyers and giving them fair warning that the time to move is definitely now.



This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
ActiveRain Community
California San Mateo County San Mateo
lower loan limits

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Jon Quist
Tucson's BUYERS ONLY Realtor since 1996

Yet another probable "nail in the coffin" for the housing market. The main effect will be another loss in the value of people's homes.

Very sad.

You'd think they were staying up late, far into the night, coming up with helpful regulations like this.

Apr 06, 2011 07:30 PM #1
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


John Balladares

Ask me a question
Spam prevention