Jumbo Loan Limits Lowering Soon: Will This Impact Your Beach Drive Home?

I tend to shy away from writing about my "day job" on Beach Drive Blog…however it occurred to me that there are some significant changes that may impact many in the Alki area who have higher valued homes that may require larger loan amounts with their mortgages.  I'd be remiss not to give my neighbors a heads up on something that may have dramatic impact on their finances.

Unless Congress passes an extension of the current loan limits, they will be lowered on October 1, 2011 and possibly again on January 1, 2012.  The current conforming "high balance" loan limit for a single family dwelling in the Seattle area is $567,500, any loan amount over that is considered a "jumbo" (or non-conforming) and often has a higher interest rate and tougher qualifying guidelines.  Our current conforming loan limits are technically "temporary" and are set to roll back to $506,000 on October 1, 2011. Fannie Mae has hinted that we may see loan amounts reduced further effective 2012 as conforming loan limits are based on median home values.  We probably won't have more information about the loan limits for next year until November. 

Reducing the loan limits from $567,500 to $506,000 means that potential home buyers will need to come up with $61,500 more for a down payment if they want to have a conforming mortgage, for a home priced around $710,000.  If you are selling a home in this price range, you may want to consider that there may be fewer buyers available should your home require a larger down payment or jumbo financing.  For those considering refinancing a conforming mortgage, if their loan amount is over $506,000, they should act soon.  Often times, lenders will implement guidelines well in advance to what Fannie Mae, Freddie Mac, FHA or VA will do in order to not get caught holding a mortgage with "yesterday's" higher loan amount.

Loan amounts are being reduced across Washington State, I'm addressing the limits that will be impacting our West Seattle neighborhood.   FHA "high balance" loan limits are set to be reduced on October 1, 2011 as well.

Mortgage rates are still very low and the difference between a jumbo and conforming interest rate is about 0.5% in rate for a 30 year fixed rate mortgage. If I can be of any assistance, please contact me.  I'm always happy to help a neighbhor.

And now…back to our regular programming.

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