Mortgage Insider for Branches
The Mortgage Insider For Branches September 11th, 2008 10:29 AM
Conforming Loan Limits Set To Decrease In Certain High-Cost Areas
Conforming mortgages are limited by loan size, based on "typical" housing costs around the country. Since 1980, as home prices have increased, so have conforming loan limits.
The current conforming limit on a single-unit property is $417,000.
Earlier this year, as part of the Economic Stimulus Act of 2008, Congress authorized conforming loan limits increase in "high-cost" areas around the country. In Los Angeles County, for example, a mortgage can be as large as $729,750 and still be considered "conforming".
But beginning in 2009, those increases roll-back. Effective January 1, conforming mortgage in high-cost areas will be limited to $625,500.
Changes to conforming loan limits impact everyone with a stake in real estate, even if their neighborhoods are not considered "high-cost". This is because conforming mortgages offer the widest selection of home loan products, and often at the lowest rates. The widespread availability of conforming mortgages helps to support home sales nationwide ands provide ample refinancing options for homeowners that need it.
Starting with the New Year, fewer people will be eligible.
To lookup the conforming loan limits in your neighborhood, visit the HUD Web site. If you have specific questions related to your home or an upcoming purchase, contact me directly anytime.
Posted on September 11, 2008
New Mortgage Rules Put Limits On Residential Real Estate Investors
In its last act as a semi-independent company, Fannie Mae altered mortgage guidelines for real estate investors last Friday. It was Fannie's 22nd update this year.
The first part of the guideline change limits the number of properties owned by any one person.
Fannie Mae will now decline any mortgage application for a second home or investment property if the mortgage applicant already finances, or will finance, more than 4 properties in total.
The former guidelines allowed for 10.
There is a loophole, however. Fannie Mae will not count properties against the 4-property limit if they are held in the name of a corporation. This holds even if the real estate investor is the sole owner of said corporation.
Investors, therefore, should consider moving their properties into a corporate structure to avoid triggering Fannie Mae's 4-property limit. Investors often take this step for liability and taxation reasons, but it's now a good idea for mortgage approval reasons, too.
The second part of the guideline change cannot be so easily avoided. Fannie Mae is assessing new, loan-to-value based loan fees on all investment property mortgages.
- Loan-to-value less than 75 percent : 1.75% loan fee
- Loan-to-value 75.01-80.00 percent : 3.00% loan fee
- Loan-to-value 80.01-90.00 percent : 3.75% loan fee
These fees are mandatory and are in addition to any whatever other risk-based loan fees Fannie Mae may assess. Currently, those fees amount to a half-percent at minimum for real estate investors.
Since its Fannie/Freddie takeover, government officials have not addressed whether mortgage guidelines will be rolled back to "a looser time". If they are, it would be a big deal for real estate investors because, as many are finding out, low rates don't matter much if you can't qualify for them.
If you're currently in the market for an investment property (or two), consider that it may be cheaper and simpler to purchase over the near-term versus the long-term. And consider moving your existing properties into a corporate structure first.
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