The Federal Housing Administration announced today that mortgage loan amounts backed by Fannie Mae and Freddie Mac will rise to a maximum of $729,750 in more than 70 counties across the U.S. The previous maximum amount for these loans, known as "conforming loans," was $417,000.
While the counties now eligible for the highest amounts are in California, New York and other high priced areas, the new conforming limit in Bend was increased to $447,500.
Lower "jumbo" rates
It is anticipated that allowing Freddie and Fannie to guarantee loans up to the new limits will encourage lenders to reduce interest rates on loans above the previous threshold of $417,000, so called "jumbo" loans. Prior to the credit crunch which began last summer, the difference in rates between conforming and jumbo loans was around .25 percent. The current tighter credit market has seen this spread increase to as much as 1 percent.
What this means locally
The new loan limit will not only help Central Oregonians qualify for bigger loan amounts. Another, perhaps bigger, benefit locally is that increased conforming limits in our "feeder" markets (particularly California) will help those people wanting to move here improve the chances of selling their existing houses, as more buyers will be able to afford higher priced homes there. The new conforming limit in San Diego is $696,500, Sacramento $580,000 and Riverside-San Bernadino $500,000.
The new rates are supposedly temporary and set to expire Dec. 1 of this year.
Here's a link to a table showing the new limits by MSA:
http://online.wsj.com/public/resources/documents/loanlimits0308.xls
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