Or, call me at: An upcoming change in the conforming loan limits could have a big impact on many high value real estate markets. Effective October 1, the maximum conforming loan limit will drop from the current $729,750 to $625,500. The change will mean that many mortgage borrowers who currently have access to conforming rates – which are the best in the marketplace – will fall into the jumbo loan category and be subject to higher rates and tougher underwriting guidelines.
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Most loans are currently priced in three general tiers: conforming ($417,000 or less), super conforming ($417,001 to $729,750), and jumbo (greater than $729,750). The super conforming category was created after the housing bust as a relief measure for high cost markets when it became all but impossible to get a loan larger than $417,000.
Super conforming pricing is not quite as good as conforming pricing, but it’s definitely close - and still far better than jumbo pricing. For instance, if a conforming 30-year fixed prices out at 4.875%, the super conforming rate might be slightly higher at 5.125%.
The jumbo rate for a 30-year fixed can be as much as 1% higher than the super conforming rate.
The loan limits change is not going to be a welcome one for buyers and sellers in the $700K+ price range because it will diminish buyer purchasing power. If you’re shopping for a home in this price range, it might be a good idea to close the deal before the loan limit changes take effect, otherwise you will need to come in with a larger down payment to get the better loan rates.
More information about the current conforming loan limits can be found on the Fannie Mae website.
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