Aside from the new Obama Presidency, there are going to be a number of changes made in the mortgage industry coming in 2009; many of which will already start affecting potential homeowners and borrowers. In the upcoming weeks, you’ll start to see lenders preemptively limiting loan guidelines to prepare for the changes to come next year. Since the average mortgage loan process ranges anywhere from 3-6 weeks, you can expect lenders to make the necessary changes to ensure these loans fund in time before the changes are made. In particular, the two changes worth mentioning are the increase of larger down payments requirements and expiration of increased loan limits here in California.

Increased Loan Limits To Expire - Conventional and FHA Mortgages
The temporary increase of loan limits to $729,750 has been welcomed here in California because of our higher media home prices, especially in regions such as the Bay Area and parts of Southern California. In particular, these higher loan limits allowed people to finance more of their home without having to suffer the penalty of typical “jumbo” loans.  By 2009, the highest loan limit for California backed by the government will be $625,500 in specific high cost areas. The same will go for FHA insured loans, with the high cost limit set at $625,500.

Although the changes will be made nationwide, residents of California should pay special attention to these changing mortgage limits.  Even with declining home values, it can still be quite easy to surpass this cap of $625,500. If you happen to exceed these limits, you’ll face a few troubling issues. First of all, you’ll have a harder time securing a home loan in general since your loan is simply beyond the government limitations. More importantly, when you do find a loan, you’ll be paying more on your monthly mortgage payment. Lenders place greater risk on these jumbo loans and typically increase the mortgage rate to make up for this risk. Quite soon you may find yourself paying in the range of 7% for a 30 year fixed loan where you might have only paid 6% currently.

FHA Larger Down Payments Requirement
Another change that we can expect is the increase of FHA down payment requirements to 3.5% as opposed to the current 3%. The difference of .5% may be marginal, but it is another thing to keep in mind. You may find lenders expecting 3.5% from potential homebuyers quite soon as they factor in the time it takes to find a home.  Recently, the FHA has also done away with their down payment assistance programs as analysts concluded these loans were more likely to default.

Dropping home prices and already tight guidelines make some of these changes seem less of a big deal, but for those looking to squeeze by, now may be the time to get their foot into the door.  There are likely to be even more changes expected by next year, but for the time being these two were the most anticipated changes for 2009. For more information, you can find a lender in your area by using our mortgage broker and lender directory.

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