New Loan Limits From FHA, Freddie Mac & Fannie Mae – What Does This Mean For Big Bear?

I received the email below from the California Assocation of Realtors this past Friday and thought I would pass it along.

UPDATE!

Government Announces Conforming Loan Limit Increases

The Office of Federal Housing Enterprise Oversight (OFHEO) today announced it has temporarily increased limits on conforming loans offered by government-sponsored enterprises, Fannie Mae and Freddie Mac, from $417,000 to as high as $729,750 in fourteen counties in California for loans originated between July 1, 2007 and Dec. 31, 2008. Fannie and Freddie are reported to be working out new underwriting standards and expect to begin offering the new loans soon.
 
Also, on Wednesday, the government raised the conforming loan limit for mortgages guaranteed by the Federal Housing Administration, and has begun offering the maximum limit of $729,750 for 14 California counties, up from $362,790, for loans originated between now and Dec. 31, 2008.
 
The Fed’s economic stimulus package approved earlier this year called for temporary increases on conforming and FHA loan limits to allow troubled borrowers to refinance out of sub-prime loans and make it easier for many new buyers to qualify for mortgages in high-cost areas, particularly in California where home prices remain among the highest in the nation.
 
To view a list of the new FHA Mortgage Limits by county, go to: FHA Loan Limits by County
 
For a list of the proposed loan limit changes for Fannie Mae and Freddie Mac, go to: Fannie Mae and Freddie Mac Proposed Loan Limit Changes

So, how will these new limits relate to the Big Bear area?

According to the HUD site, the new FHA limits for San Bernardino County and the Big Bear area are as follows:

Some of the new benefits of an FHA loan, as provided by a loan officer I recommend, Heidi Hamilton, with National City Mortage.

-First Time Buyer Clause – Not required – anyone can use the FHA program

-Down Payment – 3%

-Gifts – Allowed for the down payment and closing costs

-Co-Borrowers – Relatives can be co-borrowers on these loans with no limits on the ratios of the occupying buyer.   FHA will not allow a co-borrower who is a heavy real estate investor.

-Credit Scores – Allows lower credit scores with no hits to the interest rates

-Allows for higher ratios

-Bankruptcy – Only requires two years since the completion of a BK

-2nd’s – There are some 2nd’s available to assist the borrower with the down payment – Income limits for these 2nd’s will apply

-Declining Market – FHA does not have a mandatory 5% increase in the loan amount when the property falls within a Declining Market area

-Appraisals – Much easier than they used to be, more similar to the conventional appraisals with minimum repair requirements

-Seller paid closing costs  – Allowed, but no longer considered mandatory.

-First 6 months interest payments – Seller can pay up to 6 months of the buyers interest payments (buyer must pay taxes, insurance and MI)

-Seller Paid Closing Costs – Limited to 6% of the loan amount (includes any interest payments mentioned in last bullet point.

Freddie Mac and Fannie Mae limits are the same for the Big Bear area.  This is a $83,000 increase from the previous conventional loan limits of $417,000.

This information is still fresh and many of the details are still being worked out.  For example, I have heard the the interest rates for these higher loan limits could be a full 1-2% higher than the standard interest rates.  If that is this case, then it might not provide the help it was intended to do, as the current jumbo rates are already in this same range.

These limit increases will only last until the end of the year.  This could change, but as of right now, that is what has been approved by Congress.

How will these limits affect Big Bear?  I’d say it is too early to tell. But, if the interest rates for these new loan limits are going to be 1-2% higher than current rates, I don’t see any relief for buyers.  Something’s gotta give.

Stay tuned!

Update – take a look at this.