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Buyers in the market for an expensive home may want to make a move sooner than later. On October 1, the maximum conforming loan limits for jumbo loan mortgages will decrease in many counties around the U.S. Loans are guaranteed by the Federal Housing Administration and mortgage giants Fannie Mae or Freddie Mac but home loans above certain dollar amounts (the conforming loan limit) must be secured with a secondary mortgage which generally carries a higher interest rate.
Limits were raised temporarily in 2008 to give a boost to the housing market and have been extended several times over the last few years. Buyers who purchase after the change could spend thousands of dollars more on their homes. When the conforming limits decrease, buyers will be required to take out larger jumbo loans for same total home purchase price.
Realtor.com reviewed a list of the top 25 most searched MSAs in July and discovered 12 of the top 25 MSA’s will be affected by a decrease in the Jumbo Loan limit. Consumers planning to utilize a Jumbo Loan for a home purchase in the next few months need to find a Realtor with experience in this price range that is also familiar with conforming amounts in their target areas and a lender who can move quickly.
For example, in Los Angeles the conforming loan limit will move from $729,750, meaning that a $1,000,000 loan originated on September 30 or before requires a Jumbo Loan of $270,250. The same $1,000,000 loan, after September 30, will require a jumbo loan of $374,500 because the conforming limit has been lowered to $625,500.