Anyone considering a https://www.quickenloans.com/ [mortgage] larger than $400,000, especially an https://www.quickenloans.com/home-loans/fha-loan [FHA loan], should understand that if Congress doesn’t extend higher loan limits, getting those loans might become more difficult and expensive
Detroit, MI (Vocus) October 1, 2010
Higher loan limits were passed by congress two years ago to help the struggling housing market, particularly in high-cost areas. The new limits enabled Fannie Mae, Freddie Mac, and the Federal Housing Administration to back loans as high as $729,750 in specific high-cost counties, substantially exceeding the standard $417,000 limit.
This support is set to expire on December 31, 2010. If that happens, loan limits for Fannie Mae and Freddie Mac will drop back to $417,000 and FHA loan limits will drop to levels set by county.
Economists say even non–high-cost markets will be affected if the support is not extended. Current limits were based on housing bubble-era prices, which were significantly higher than today’s low home prices. When new limits are recalculated using today’s home prices, the conforming limit will certainly be lower.
If Congress does not extend the support of higher loan limits, it would mean borrowers would face significantly higher interest rates often associated with jumbo loans and would have to meet more stringent standards of private lenders to qualify for financing on pricier homes. And, since loans can take several weeks to process, consumers could begin feeling the effects of the impending change as early as November as lenders prepare for the coming shift.
“Anyone considering a mortgage larger than $400,000, especially an FHA loan, should understand that if Congress doesn’t extend higher loan limits, getting those loans might become more difficult and expensive,” said Jay Farner, President of Quicken Loans. “If you’re in the market for a larger loan, I’d recommend investigating your options now before the higher limits expire.”