Or, call me at: So far, it doesn’t appear likely that an extension of the temporary conforming loan limit is going to make any headway in Congress. The current conforming loan limit of $729,750 is set to be reduced to $625,500 on October 1, which means that all mortgage loans larger than $625,500 will be considered jumbo and subject to higher rates and tougher underwriting guidelines. From HousingWire:
Two bills to extend the limits, one introduced in the House and another in the Senate, were never voted on. A spokesman for Rep. John Campbell (R-Calif.), who co-sponsored the House bill, said an extension did not make it into a short-term spending bill the House will vote on next week.
As I wrote about last week, industry groups have been pushing hard to get an extension of the loan limits because of fears that lowering the limit will further damage an already fragile housing market.
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Most mortgages out there are far below $625,500, so this probably will impact only a relatively small number of mortgage borrowers. However, for those relatively few seeking homes in high-priced markets, having to go jumbo loan instead of conforming could significantly impact purchasing power. A jumbo 30-year fixed interest rate can run as much as 1% or more higher than a conforming 30-year fixed interest rate. At $729,750, the payment difference between the two loans is over $400 (assuming 4.75% for the conforming loan and 5.75% for the jumbo), which means buyers of high-priced properties will have much less purchasing power. To compensate, home prices in high-priced markets would need to come down as much as 10%.
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