July 5th, 2011 9:45 AM by Lehel S.
If conforming loan limits drop in October, more than 30,000 families in California will have to deal with higher down payments and mortgage rates and tougher loan qualification rules, the California Association of Realtors said today..Unless Congress steps in, the limit will drop to $625,500 from $729,950 for most places on Oct. 1. The limit establishes the maximum mortgage amount the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee.
In Orange County, where the conforming loan maximum is $729,750, 13.3% of home sales would be ineligible under FHA-backed loans by C.A.R.’s calculations, and 6.2% of home sales with loans sponsored by Fannie Mae and Freddie Mac would be nixed
“Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers,” C.A.R. said in a news release.
From C.A.R. President Beth Peerce:
“By reducing the conforming loan limit, thousands of California homebuyers will be shut out of homeownership. The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery. We urge Congress to maintain the current limits and make them permanent to provide homeowners and homebuyers with affordable financing and help stabilize local housing markets.”
Last October, Congress voted to extend the higher conforming loan limits through September of this year. But the present move to wind down government support for home loans includes reducing the limits.