The Federal Housing Finance Agency (FHFA) has officially announced the "new" conforming loan limit for 2009 will remain at $417,000 for most areas in the U.S., unchanged since 2006. Loan limits for high-cost areas like Santa Clara County, are capped at $625,500, down from the temporary $729,750 conforming loan limit. Loan limits for many areas of the state do not reach this lower threshold and are dramatically reduced from 2008.
The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
In California, the new conforming loan limits for metropolitan areas range from $474,950 in the Sacramento-Arden-Arcade-Roseville metropolitan area, covering El Dorado, Placer, Sacramento and Yolo counties; to $625,500 in the Los Angeles-Long Beach-Santa Ana metropolitan area and the counties of Santa Clara and San Mateo. Realtors are urging Congress to make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent.
"Although price declines mean that the total number of homes eligible for conforming financing has increased, we're disappointed that the $729,750 limit stipulated in the Economic Stimulus Act of 2008 signed in February was not made permanent," California Association of REALTORS® president William E. Brown said. "The reduction in the loan limit to $625,500 will negatively impact both the interest rates and the availability of funds for jumbo mortgages."
"Now is not the time to limit the availability of affordable mortgages. Keeping the conforming loan limit at the $729,750 limit would make housing more affordable in high-cost areas like Silicon Valley," said Leannah Hunt, president of the Silicon Valley Association of REALTORS®.
Home buyers need to act right away if they are interested in taking advantage of the $729,750 temporary conforming loan limit. Even if the loan limit remains effective until the end of the year, Realtors are told some lenders are setting cut-off dates for the temporary conforming loan limit earlier than the Dec. 31, 2008 deadline.
Caroline Wolf, a certified mortgage planning specialist with Princeton Capital in Palo Alto and an affiliate member of the Silicon Valley Association of REALTORS®, told Realtors at a recent meeting that while the deadline for the temporary conforming loan limit of $729,750 is Dec. 31 2008, the cut-off date for such loan applications varies from lender to lender. Some lenders have set the cut-off date for loans qualifying for the temporary conforming loan limit to Nov. 28, while others are setting Dec. 15 and Dec. 18 deadlines.
Wolf said many lenders are already accepting applications for the 2009 conforming loan limits. She also reminded Realtors the underwriting guidelines "are still tightening up" and to make sure all documents of clients are in order.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.