New “High Balance” loan limit rules go into effect on October 1st

Anyone known of someone in need of financing a mortgage loan above the $417,000 conforming loan size? Many unfortunately have been sitting on the fence, not acting on the current increased temporary conforming loan limits, better known as “High Balance” loans, this affects the maximum loan sizes for FHA and Conventional loans.  The maximum loan size will be reduced as of October 1^st (all existing loans must close by 9/30).  For those who had “jumbo financing” (loans above $417,000) with above market interest rates, the ability to obtain a “High Balance” loan can mean the difference between a homeowner saving hundreds of dollars on their mortgage payment every month. There is a huge need for this type of loan that affects many areas in the Northeast.

Since the beginning of the housing market fallout in late 2007, consumer loans above the standard $417,000 maximum loan size have had quite a challenge obtaining financing. The market for any jumbo loans essentially dried up or was so restrictive that no one could obtain financing. This phenomenon contributed to the further plunge in housing prices and more foreclosures for people in all markets. When Congress passed temporary high balance limits in 2008 for certain high priced counties…….which include several highly populated areas in Maryland, to have a maximum conforming loan size loan up to $729,750. The change provided much needed relief for prospective and current homeowners in designated high cost areas around the country.  The mortgage market was certainly helped, certainly not saved, by the ability to provide financing options to those applicable borrowers. Unfortunately, today many politicians and political pundits are calling for government to “get out of the housing sector,” the Government has heeded the call and allowed for this change to go into effect.  With many high priced markets still facing a glut of excess inventory, these changes are expected to add to the difficulties in housing and an already fragile economy.

For a typical purchase or refinance, most banks are requiring high balance loans to be submitted by August 20^th in order for them to get processed and closed by the end of September. Those missing the deadline will be faced with the new high balance loan limits. In Howard County alone the limit is being reduced $65,500 to $494,500. Don’t be one to sit and delay, those missing out may not qualify or be forced to bring a lot of extra money to qualify for a loan.  Many may think Congress will eventually step in and extend the limits. In today’s divided Congress and fears of further “tax payer liability”, I personally wouldn’t be one to count on it. To find out how the changes affect you and your plans, email us to receive more information.