For anyone in the New York/New Jersey area this is very important!
As of now, the temporary conforming loan limits are set to expire on September 30, 2011. There has been some recent chatter inn Congress about extending these limits. Barney Frank recently said that he believes the Obama administration will support keeping the loan limits where they’re at now. He also told the WSJ he believes many House Republicans will support doing so, given current housing market concerns.
“I think there’s a very real chance they’ll get extended,” Rep. Frank told the WSJ.
“Temporary loan limits” were enacted in 2008 as part of the government’s economic stimulus package. This was because private money left the mortgage market, home buyers that were unable (or unwilling) to bring a large enough downpayment to get their respective loan sizes to $417,000 or less found themselves without financing.
20 percent down didn’t matter anymore. You had to bring as much money as needed to get to the magic $417,000 number.
In areas like New York and New Jersey this left a large sector of the housing market a complete disaster.
In February 2008, to help more Americans get financing, and to help the housing market recover quicker, Congress agreed to let Fannie Mae and Freddie Mac securitize mortgages for more than $417,000, based on local home prices.
The “variable loan limit” concept proved to be a success and was later rolled into the 2008 Housing and Recovery Act which made “high-cost areas” permanent, but with a slightly different formula. Under the Housing and Recovery Act, loan size limits are not to exceed $625,500.
The Housing and Recovery Act limits take effect October 1, 2011 — one day after the original, temporary limits expire.
Starting October 1, 2011, today’s high-cost conforming loan limits will be reduced in the New York/New Jersey area from $729,750 to $625,500. This means that home buyers will have to bring an extra $104,250 to the closing table if they want to avoid having to pay jumbo mortgage rates. Fixed jumbo mortgage rates are traditionally higher than conforming fixed ones.
Mortgage rates may still be low come October, but you may not be eligible for them because of your loan size. Refinancing households should pay attention, too. You won’t be able to refinance a $729,750 mortgage to new conforming loan without paying $104,250 at your closing toward your loan balance.
October 1, 2011 is coming up quick. If you’re buying a home this fall, or thinking of a refinance, make sure you act sooner rather than later. The clock is ticking. As we have seen recently, we cannot rely on Congress to get anything done!
Jacob Dean Mortgage
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If you are in need of a mortgage in Morris County, Middlesex County, Sussex County, Bergen County or anywhere in New Jersey please give me a call!