Conforming Loan Limits Are Up!

by Sheryl Landrum
CMR Columnist

There's great news in the mortgage and housing industry. On Thursday, March 6, 2008, the FHA (Federal Housing Administration) raised the conforming home loan limit to 125% of the median home price. This raises the limit to $697,000 in San Diego County; other pricey California counties have had their limits raised to $729,750, which is the maximum amount. Soon, Fannie Mae and Freddie Mac should raise their limits as well. What does this mean to California homeowners looking for new home loans?

New Home Loans Have Just Become More Affordable and Easier to Get

Prior to the mortgage meltdown that began about a year ago, the difference between a mortgage within the conforming loan limit (less than $417,000) and a jumbo loan (above $417,000) was approximately 0.25% in the interest rate charged. However, once home loan defaults began to rise and lenders became vulnerable to home foreclosures, the difference between a conforming loan and a jumbo mortgage became 1-2% more in the interest rate charged. To add icing to the cake, conventional loans were also easier to qualify for, and often came with better terms. This made it much harder to qualify, or afford, a jumbo home loan. With median home prices in San Diego at $429,000, and in many other counties even higher, many borrowers were affected by this change.

How Will the Limit Change Affect California Home Loans?

Not only should homeowners and homebuyers find it easier to qualify for new home loans at better terms and interest rates, but the FHA also offers easier borrowing guidelines than most lenders. Some of the FHA highlights are:
  • No minimum credit score.
  • 3% down payment required.
  • 95% cash out refinancing available.
  • No reserves required.
  • Seller contributions up to 6%.
  • Eligible borrowers do not have to be U.S. citizens but must have legal residency status, be eligible to work in the U.S., and have a valid social security number.
  • Non-occupying co-borrowers acceptable on 1 unit properties.
As you can see, these new guidelines are geared toward stimulating our mortgage and housing industry, which can affect the overall economy and hopefully ease the surge in home mortgage foreclosures. With these new limits in place, homebuyers can take advantage of lower home prices. For those homeowners with mortgages that are adjustable and risky, we could also see a move to refinance into more secure home loans. If you want to learn more about how these new changes can affect you and your mortgage, talk to a trusted loan officer today.

Source:
FHA Raises Housing Loan Limits in County, by Emmet Pierce, The San Diego Union Tribune, Thursday, March 6, 2008

About the Author
Sheryl Landrum is a Loan Officer with General Mortgage Corporation in San Diego, California and a freelance writer specializing in mortgage issues.

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