By: Jill Urban
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In this tight financial market, getting a mortgage is tough enough, but now new rules are about to take effect that could further change the landscape for lending.
“The landscape of mortgage finance is about to change drastically,” says Ross Weinstein of Exclusive Capital Consultants. “Loan limits are set to be reduced on September 30 from the current limit of just under $730,000 to just under $625,000.”
Two years ago, to help jumpstart a slow housing market and to make loans more readily available, conforming loan limits were raised to just under $730,000. The high balance loan allowed buyers to avoid the need for a more expensive and harder to access “jumbo loan.”
Yet soon, when the higher limit becomes $625,000, anyone who needs to borrow more than that will have to pay for a jumbo loan.
“When you get into that jumbo bucket you can expect to pay more for your interest rate, you are going to pay higher fees and there will be fewer banks willing to offer those types of loans,” says Weinstein.
Unlike the conforming loans, Weinstein says that jumbo loans are not backed by Fannie Mae and Freddie Mac, so each bank will have its own guidelines and restrictions. Shop for more than just a good rate to find the right bank.
Federal Housing Administration loans will also be affected by this change.
As for the New York housing market, where home prices in the $700,000 range are common, President David Maundrell of AptsAndLofts.com says this will certainly shrink the buying pool, which means sales prices may have to come down and rentals could go up.
“We have a very hot rental market here right now that is only going to increase because the buyer pool, once it shrinks on the sales side, it’s only going to increase and create more competition on the rental side,” says Maundrell.
There are agencies and politicians who are pushing for legislation to have the limit deadlines extended, but so far nothing has happened. In the meanwhile, those who are in contract or buy or refinance at the price point should play it safe and make sure the deal is done by the deadline.
This article originally appeared in the August 15, 2011 edition of NY1.
