As you know, the temporary conforming loan limits of $729,750 for conventional and FHA programs are slated to expire on December 31, 2010. While there is discussion that this increased loan limit may be extended, the decision has not yet been made. What we do know is that taking advantage of the increase while it is currently in effect will make a big difference for buyers.

With the existing loan limit of $729,750, a buyer can put down 20% and purchase a home up to $913,000. When the loan limit reverts back to $625,500, that same buyer with that same 20% down payment will be able to purchase a home up to $782,000. This is a substantial purchase price difference; $128,000.

If the loan limit increase is not extended, we will begin to see increases in rates in advance of the December 31, 2010 expiration date. This is because lenders will anticipate the end of the program and they will want to clear their books of these loans.

Another important consideration for buyers is that, unlike most conventional fixed rate mortgages, FHA loans are assumable. With the current FHA limit at $729,750 and 30-year fixed rates at about 4.5%, this can be a significant benefit for today’s buyers. Should they want to sell their home in the next 5 or so years, they will have a very attractive assumable fixed rate loan when rates are likely to be significantly higher. Selling their home would be much more appealing and marketable if it came with a 4.5% fixed rate loan compared to another house requiring new financing at possibly 7-8% interest rate - or more.

Please contact me to discuss strategies for your buyers and sellers.

Andy Block - Mortgage Advisor & Financial Advisor
Opes Advisors

Email Me

Direct: 650.931.0605
Fax: 650.931.0601

License #01096311
400 S. El Camino Real
Suite 250
San Mateo, CA 94402
Fax 650.931.0601


Opes Advisors is licensed as a registered investment advisor with the Securities and Exchange Commission (SEC) and is licensed as a Residential Mortgage Lender by the CA Dept of Real Estate.

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