President Obama on Friday signed a bill increasing the FHA loan limits nationally. Here in Orange County that will raise the FHA loan limit to $729,750. This will help those buyers buying or considering buying a home with a loan from $625,000 to $729,750. Prior to this bill, no federally backed loans greater than $625,000 were available. Almost all loans of that size were considered "jumbo" loans with higher interest rates and tougher qualifying standards. A few things to consider with the new law:
1. It only applies to FHA loans. It does not apply to Fannie Mae or Freddie Mac loans. FHA loans tend to have lower interest rates, but some high costs associated with them.
2. Last time the limits were set at $729,750, we thought they were indefinitely set there, but with Fannie Mae, Freddie Mac, and FHA all struggling, the loan limits were lowered earlier this year. The lesson: take advantage of the increase in loan limits now while they are available; they may be gone tomorrow.
3. It can take a couple of weeks for guidelines on increased loan limits to work their way through lenders' systems, so don't be discouraged if you don't see low rates posted yet on $700,000 loans for lenders. It's coming.
If you have questions on how this might affect your decision to buy or sell, call me and I'll walk you through your options.