Tuesday, July 19, 2011

New conforming Loan Limits

What will the new Conforming Loan Limits that go into affect do to the IE market? Many are predicting another wave of price declines when the lower limits go into affect. The current loan limit is $500k. However once you get over $417k getting a loan is a lot harder and usually requires a better credit score, DTI and a higher down payment (15% at least). So for much of the buyers $417k is still the loan limit. The new conforming limit will drop to $335,350. Which is still far higher than what most homes in the IE cost. In effect, the loan limit reduction will only affect those homes priced over that amount (or a little higher based on the down payment). That is only 12% of the home sales in the IE, the other 88% are not going to be affected. So, if you are looking at homes over $350k you might want to relax a few months, there is a good chance that segment of the market might see some price drops. But if you are looking in the under $350k range I doubt there will be much change. Of course this is assuming the government doesn't pull some rabbit out of a hat and extend the limits.....

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Dave Velasco said...

Sometimes it gets abused, getting somewhat different and negative results. But as long as this new conforming loan limits are used positively and in a good way, then I doubt having trouble with it.

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housesearch said...
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