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07-05-2011 12:52 PM
This is addressed in the Mortgage Forum.
The short answer if you don't want to click the link: Yes, many banks have turned off the tap. Our end date is 07/15/2011 for loans over $625,500 - FHA, VA, Conforming Jumbo - with some companies able to stretch out to 08/01/2011.
There are still loans available over $625,500 but underwriting varies wildly company to company, and you'll need at least 20% down for now. Some companies are whispering about 10% down options, but such rumblings are just that and nothing more.
Thanks for reading,
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07-05-2011 10:59 PM
i predict the lowered limits will have a larger than expected impact on home sales.
my guess is it will have the opposite effect of the $8k tax credit. when the home buyer's tax credit was available, it affected higher priced homes. everyone caught the happy-house-hunting-euphoria in all price strata.
when the loan limit drops $104k in san mateo, santa clara and san francisco counties. i think sales could drop more than most people expect due to the higher cost of the loan over $625k. potential buyers at all price levels may become even more cautious due to the negative sales news. like the tax credit, i think the impact will be widespread because of changing sentiment/psychologly (people are more emotional than rational).
in millbrae, there are quite a few houses in the lower-upper $700k range so it'll be interesting to watch this city. if buyers are really buying at the margins, there should be a noticable effect on sales and by proxy an effect on prices.
07-05-2011 11:57 PM
I also think some effect is likely in general, but it really depends on the actual buyer pool and location. If they have the money to put more down to meet limits it will likely have almost no impact. My guess is that towns that are really expensive will have zero/minimal impact as buyers aren't straining to meet the minimum for the most part (i.e. Palo Alto, Los Altos, Los Gatos, nicer parts of Cupertino, etc.). I do believe areas where the median price is lower will be much more heavily affected (cheaper parts of sunnyvale, san mateo, belmont, cheaper parts of san carlos, etc.). Still, the effect should be less than 104k. The actual effect should be reflected in the additional borrowing costs (perhaps being pushed to jumbo). I guess we'll see!
07-06-2011 11:08 AM
This change effectively cuts my target price by ~100K. I was looking at 900K houses with a 180K downpayment. Now, I can't afford those houses unless I increase my downpayment to 280K (almost by 60%)!
Getting a jumbo loan with higher rate is an option, but I believe it wouldn't be wise as I'd be stretching my monthly cashflow budget.
On the other hand, I bet I am not the only buyer who can't easily increase the downpayment by another 100K, so I bet the prices will go down accordingly..
07-06-2011 11:45 AM
The spread in rate between conforming loans and private portfolio products is roughly .375%. On a $720k loan that's $160 per month - not a huge difference relatively speaking. I recognize that it's not my $160 per month to spend, so to someone else that might be a bigger amount than it sounds.
The more pressing issue will be the patchwork of Underwriting standards. Conventional conforming loans may have debt to income ratios significantly higher than private portfolio loans. Cash reserve, Zip code / County code restrictions may apply. Believe me, if Conforming loan limits are reduced, with anticipated sales price reductions to follow, Underwriting guidelines on portfolio loans won't expand, but contract based on market pressure.
Thanks for reading,
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07-06-2011 05:38 PM
This change effectively cuts my target price by ~100K.
We were in the same boat, that's why I asked. We had thought it will end Sept 30, didn't expect it ends now.