Tuesday, September 27, 2011

U.S. to lower the size of mortgage it will guarantee - but I don't think that's going to have too much of a negative impact

Here's an article from today's L.A. Times about lower loan limits that will go into effect at the end of September.  While many of my colleagues are wringing their hands over this change, I'd like to point out three things. 1) The limit is reducing from $729,750 to $625,500.  So any loan amount over $625k will now need to have jumbo financing. Therefore this will really only impact home buyers, and home prices, between those two loan amounts only -- that's only a price spread of $104,000+.  2) Jumbo rates are at an all-time low. 3) Yes, many of the areas I serve have high home prices; but a greater amount of neighborhoods have home prices that don't exceed $600,000 in the first place.  So will there be wide-spread harm? It remains to be seen, but I doubt it.

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