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Melissa Mason

High Balanced Loan Limits

Tuesday, May 3, 2011 - Article by: Melissa Mason - Envoy Mortgage - Message

For loans originated after September 30, 2011 (have to November 30th to close) there will be a major structural change to available home loans. The current high-balance loan limits are set to decrease from $729,750 to $625,000.

Three years ago the Government, via Fannie Mae and Freddie Mac, increased the maximum conforming loan limit to $729,750 in high-cost areas such as Fairfield County CT and other areas around the country. Per Fannie Mae "Loans originated on or after October 1, 2011, will use the "permanent" high-cost area loan limits established by FHFA under a formula of 115% of the 2010 median home price, up to a maximum of $625,500 for a 1-unit property in the continental U.S." - Source

When the max loan amount for a conforming loan returns to $625,000, many consumers will lose over $100,000 of purchasing power. The maximum loan amount for FHA borrowers will be $625,000 as well. This means that clients utilizing jumbo FHA loans will also lose $100,000 of purchasing power. Anything over $625,000 will be considered a "jumbo loan". Generally speaking, jumbo loans are more expensive, require a 20% down payment and are harder to obtain than conforming loans.
If you are a home-buyer looking in the $625K - $730K range, you may want to intensify your search and plan on closing prior to November 30th. If you're thinking of listing your home in the $625,000 - $800,000 range, it's important for you to know that your pool of available buyers will decrease significantly once these changes go into affect later this year.

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