Still confused about Conforming Loan Limits?

3 Oceans Real Estate provides some answers:

Raising the conforming loan limit has the following benefits:

1. It does in fact greatly stimulate the economy

2. Many consumers who got in over their head will now be able to afford their mortgage

3. Greater affordability for housing is created

4. It will influence a portion of the jumbo market that has been lost and create some investor confidence, and finally

5. California has been long overdue to have a raise to the conforming limit given that over 50% of the nation’s jumbo mortgages were originated in California.

Okay, let’s say that raising the conforming loan limit is good for a moment. What’s next and what are the details? There’s still some speculation, but here goes:

1. The conforming loan amount will be determined based on 125% of the median price of a given county…

2. This allowance will NOT go into effect for purchase or refinance transactions until July 1, 2008 (that’s the earliest date that the loan application may be signed) since the market needs from now to June 30, 2008 to liquidate current qualifying mortgages available for sale from institutions

3. The types of programs allowed will be fixed-rate programs on a full-doc basis, which means that the hybrid, interest-only programs using “stated” income will not be allowed

4. The property must be single-family and owner occupied, which means that 2nd homes, investment properties and multi-unit properties are ineligible

5. Credit scores must be “reasonable” with a combined loan-to-value not to exceed 90%

6. No cash-out, which means that a refinance may not allow the borrower to receive any greater than $2,000 at closing

7. Loans must be funded and closed prior to December 31, 2008

Please visit their site for more on the matter, or feel free to ask our very own Kelly McCray.

How stimulating will raising the conforming loan limit be? [3 Oceans Real Estate]

10 thoughts on “Still confused about Conforming Loan Limits?

  1. Um, thanks for the “well reasoned” arguments to justify your position:

    “1. It does in fact greatly stimulate the economy”

  2. 4. The property must be single-family and owner occupied, which means that 2nd homes, investment properties and multi-unit properties are ineligible

    What if i want to buy a larger home to live in, and rent out my first house? Is that still considered a “2nd home” or “investment property?”

  3. the house you live in is the primary residence (owner occupied) the house you would be leaving would be the investment propety

  4. Nice clarification Alex. Kelly you are spot on.

    There are different loan classifications, and therefore terms and rates btwn investment prop, owner occupied, and vacation rental loans. What you want to do is lock in an Owner Occupied loan, which has the best terms.

    You can live in your place for 1 month and occupy, then rent out immediately. Or, if you plan to owner occupy an investment property in 2 months for example, you can also qualify for the owner occupy loan by just writing a letter stating you will be moving in etc.

    Taking out an investment property loan can cost 50-100bps more on the rate, so the best bet to build your empire is to just buy, live, and rent out and repeat.

    Stay dry everyone! The big storm is gonna hit Squaw and SF tonight and tomorrow! Powder days are here again.


  5. yo rsc,

    the freshies are already here. been up at sierra tahoe all week. we had 3 feet of them today. expecting 6 feet for tomorrow.

    lovin it!!!

  6. Nice James! 6 feet? I think we got 2-3 ft tonight! Maybe I need to upgrade the weather forecast! Gonna be exciting when I wake up tomorrow!

    How much better does it get leaving soaking SF, to come up to 3 feet+ of powder? :)

    Back to the topic, would be interesting to see if there’s delayed demand till this law takes effect.

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