How will the new loan limit impact the housing market?

Only 4 years ago, the FHA loan was not available to potential home buyers in San Jose because the conforming loan limit was $417,000.  This was one of the reasons that “exotic” loan products became available and fueled a market for negative amortization and interest only loans.  When the housing crash occurred the government set out to help local housing markets by increasing the conforming/FHA loan limit for high cost areas to $729,750. The FHA loan provided many first time home buyers an opportunity to purchase a home with 3.5% down. This also allowed many of my clients to afford a home that they would not have been able to afford 4 short years ago.  Historically, government backed loans like FHA have a significantly lower incidence of default due to the stricter lending guidelines required of the borrower. 

More than 30,000 California families will face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011.

Regionally, Marin County would be impacted the most, with more than 12 percent of home sales rendered ineligible under the lower GSE loan limit, followed by Contra Costa (11.5%), San Mateo (10.7%), San Francisco (9.9%), Monterey (8.8%), San Diego (8.2%), Sonoma (7.9%), and Santa Clara (7.8%) counties.  Under the lower FHA loan limit, San Francisco County would be impacted the most, with more than 14 percent of home sales rendered ineligible, followed by Santa Cruz (13.9%), Orange County (13.3%), Marin (13.2%), San Mateo and Ventura (both at 12.7%), Santa Clara (12.2%), San Diego (11.9%), Alameda (11.8%), Riverside (11.5%), and Contra Costa (11%) counties.  (According to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  )”

If you agree that FHA loan limits matter to our housing market and the future of Bay Area home affordability, will you take a moment to let Congress know?
Please contact your elected representative in Congress today and ask them to co-sponsor HR 1754 the “Preserving Equal Access to Mortgage Finance Programs Act.”  This legislation enjoys bi-partisan support in the House and is our only chance to preserve the existing loan limits that are so important to stabilizing the housing market.
Please click here to send your message to Congress today!
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