New home loan limits may hurt South Bay - Daily Breeze

Thayer's client planned to move into a newly constructed home and required a mortgage around the limit of what the federal government will insure. Realtors But the project needed to be completed a few weeks early to benefit from a government-backed loan with a lower rate. Jumbo loans - the federally insured mortgages that allow homebuyers to secure lower interest rates and thereby increase the size of the loan they qualify for - will see a big change on Oct. That's when the jumbo loan limits will drop nationwide. The amount of decline depends on the homes prices in each county. But don't look for a mob of homebuyers rushing to close their loans before then. That is at least partly because few consumers know about the change. This has not been a headline-catching issue by any means," said Robert Kleinhenz, deputy chief economist of the California Association of Realtors. And in an area like the South Bay, a bigger percentage of homes will fall into the range that will be affected by this. However, more than 30,000 California households could face higher down payments, greater mortgage rates and stricter loan qualification requirements as a result, according to the statewide Realtors association. October's deadline has its roots in the 2008 financial crisis, when the federal government instituted an array of measures to prevent the nation's economy from collapsing into depression. One of those measures, part of the Housing and Economic Recovery Act, was to raise the limits of jumbo loans to spur the housing market. In short, by reducing the cost of larger mortgages, homebuyers have more purchasing power and more housing options. As a result, Real Estate trade groups nationwide are encouraging members of Congress to support making the current limits permanent through HR 1754. However, creating public awareness sufficient to promote the bill has been a challenge. In fact, few people outside the real estate profession are aware of this scheduled change in jumbo loan limits and the potential ramifications.