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]