It appears that the House of Representatives will not be extending the expiration of the high balance loan limits beyond the 9/30/2011 expiration date. What does that mean to the home buyer?? let me first start by saying that the government implemented a program to try to stimulate the housing market when the market had collapsed. The decision was made to create a “High Balance Conforming Loan Limit” which would help extend loans to buyers looking in higher priced areas without having to worry about the strict guidelines and higher rates of Jumbo financing. Furthermore, the increase in balances meant that FANNIE MAE and FREDDIE MAC would be involved in purchasing the loans from the banks issuing them. FANNIE and FREDDIE do not purchase jumbo loans. The high balance loans were increased from $417,000 to the $729,750 mark. The FHA loans were also increased in Orange County to the same loan levels and only requires buyers to put 3.5% down. What does the expiration on September 30, 2011 mean to you? It could mean thousands of dollars!
After the expiration date, the high conforming loan balance will be rolled back to $625,000 from the $729,750 number. Once expired, say you buy a home and your loan is $650,000. Instead of getting the High Conforming loan pricing, which is typically alot lower than the Jumbo pricing, not only will you be required to put 20% down, but most likely you will be paying about .5% higher in rate.
If you are in the market for a home, this is important information that you must factor into your decision. If you would like further information or would like to discuss, feel free to give us a call.
Jose & Chris
{ 2 comments… read them below or add one }
Hello Jose&Chris,
My family recently was relocated to CA. for my wife’s work and we are being caught in this change. We will now be unable to purchase a home in the county we want because of this expiration. Is there any chance that Congress will act to extend this? Do you think calls and letters to our representatives would help? Also do you hear any talk about new limits in the new year? The housing market could still use a shot in the arm and this legislation can only help. Thanks for your thoughts.
Don Duffy
Don, thank you for your comments. I don’t think Congress will be extending the loan limit expiration. I am sure we would have heard about it if there was a remote chance they would. So I wouldn’t waste the effort in writing to your local representative.
So what this means for you, if your loan is above the reduced limits, it will now be considered a Jumbo loan. Rates are so low now, that even Jumbo rates are extremely attractive. However, be prepared to supply alot of income documentation to the lender and I hope you have good credit and a good size down payment.
Let us know if we can be of any assistance.
Jose Alkon