Single-family loan limits are slated to adjust upon expiration of the temporary limit increases that were part of the Housing and Economic Recovery Act of 2008.
Based on this “Difference in County Loan Limits” map, it looks like California is hit hardest with the most dramatic decrease in loan limits accross the board.
See that dark red covering California? Those are the Counties that will see over $100,000 decrease in Fannie Mae and FHA financing eligibility.
Coastal and “high cost” areas are looking at over $100,000 decrease as the new maximum loan limit is rolling back from $729,250 to $625,500.
I’ve been holding off on commenting about this to see if there are any signs of Congress pushing this date out, but I’m not seeing it.
Simply put, most of the Country will not be affected to the same degree as California.
Although the expiration is set for October 1st, 2011 – Lenders will begin to publish cut off dates for accepting new applications at the extended loan amounts.
Our cut off dates are as follows:
These dates apply to both FNMA and FHA loans:
- Loan Approval must be received by Wednesday, August 31st;
- All PTD Conditions must be received by Friday, September 9th;
- Last Day to Draw Docs is September 16th (this date is firm and cannot be negotiated)
A Blow to California
The increase of loan limits in 2008 was a real life line for California because of our incredibly inflated home prices.
Now, when national home prices are significantly lower than 2008, I don’t think there is enough resistance from Californians to prevent a roll back.
What this move really means is that any loan amount above the new, lower loan limit, is considered a Jumbo loan.
The lack of options and availability of Jumbo loans for buying or refinancing is going to put a ton of pressure on home owners and home sellers.
“Jumbo” sales price homes may experience longer sales cycles and possibly even drastic value drops as sellers desperately try to attract what few buyers are out there looking for high end real estate.
Winners and Losers
I’m not sure if I can identify any clear winners from this move.
As part of this same 2008 legislation, seller assisted programs like Nehemiah, HART, Ameridream & NFH were all put on the cutting block. If you’re going to “roll back” anything…how about these programs?
I anticipate that there will now be more competition for homes that fall within the new loan limits. Families that could previously qualify for “higher end” homes are going to be forced into lower sale price ranges due to lack of financing options.
Buyers and Real Estate Agents Beware
If you have a loan approval or pre-qualification now, and have not entered into contract, please check with your lender to see how these changes may affect you.