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Will the Proposed Conforming Loan Amounts Actually Happen?

By now, some of you have heard about the proposed changes for conforming loan amounts contained within the Economic Stimulus Package. It is currently being rushed through Washington, and up until a few days ago, appeared to have favorable momentum. However, some push back is starting to occur on the details contained within the proposal. The package includes a provision that would increase the maximum conforming loan amount as high as $729,750 in high-cost markets. One thing to note, California is currently not considered a high cost area.  Only Alaska and Hawaii have been designated with the high cost tag.  In order to get the maximum conforming amount of $729,750, California would have to be identified as a high cost area.  Additionally, the new conforming loan amounts will be temporary, possibly reverting back by year’s end. 

If passed, this should be fantastic news for California homeowners, potential buyers, and real estate activity in the Tri-Valley. Here’s how it should help. The current conforming loan limit is set at a maximum of$417,000.  Traditionally, 30 year fixed mortgage interest rates that qualify as a conforming loan are about 1% lower than jumbo loans (loan amounts higher than $417,000). With the new proposed conforming loan amount maximum, homeowners who have loan amounts between $417,000 and $729,750 may qualify for a lower interest rate through a refinance.  Also, buyers in the market qualifying for a loan between $417,000 and $729,750 will be able to purchase a desired property at the interest rate tied to the conforming loan amount. What should California homeowners be doing?  Be prepared early and act fast in order to capitalize on the temporary fix.  My suggestion is to contact a local Realtor and mortgage representative to see where you stand.

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