Conforming Loan Limits To Decrease

We just had our office meeting and the big topic was the upcoming change in the conforming loan limits. In San Diego, it is currently set at $697,500.  On September 30, 2011 the conforming loan limits will be reduced.  No one knows for sure the actual amount it will be reduced but it looks like anywhere from $150,000 - $250,000.  This will be effective the end of September.

So what does this mean to you?  Well, right now you can purchase a home with a FHA loan up to the current limit of $697,500.  You would be able to do so with 3.5% down payment.  After the change you will need to stay under $457,500 - $547,000 depending on the new limit.  If you go over the conforming loan limit you would not be able to purchase with only 3.5% down, you would need a 20% down payment.  Also the interest for a loan over the limit is about 0.75% -1.5% higher.  This will cause your monthly payment to be considerably higher.

If you are thinking that this increase will only affect people in the middle range you are wrong.  Buyer's in the higher end market will also be affected especially if they are selling a mid-priced home in order to buy that luxury home.  There will be fewer buyers for the mid level home due to the change and the sales price may need to be adjusted down.

So what can you do now to protect yourself?  First of all, if you are considering buying a mid level home, do it now before the change in loan limit goes into effect.  Sure, prices might come down a little but if you look at cost versus price (as discussed in a previous post) you may not want to wait.  If you do not have 20% to put down, take advantage of the 3.5% downpayment FHA offers before the loan limit changes.

Sellers of mid level homes should also protect themselves.  If your home is currently on the market and not moving, especially if you are in the $600,000 price range, REDUCE and get it sold.  Once the loan limit goes into effect there will be fewer buyers who will qualify to buy your home.  If your home is not yet on the market and you believe it will be in the $550,000 - $690,000 price range, list it TODAY!!!  Do not wait until the pool of buyers gets smaller.  Give yourself the best chance possible to get it sold.  CALL ME TODAY!!!