October 19, 2017

Changes coming could affect the interest rate you pay

Fannie Mae changes coming in an August 2011 announcement may restrict the maximum amount you can borrow under certain loan programs.  Depending on your purchase price range or size of loan you want, these changes could affect the interest rate you pay over the life of your mortgage.

The Federal National Mortgage Association (FNMA) known as “Fannie Mae” is a government sponsored enterprise which essentially helps keep our nations mortgage industry churning by (among other things) purchasing certain eligible loans as mortgage backed securities, thereby freeing up money for banks to re-lend.

Fannie Mae sets a limit to the loan amount that they’ll purchase, known as the “Conforming” limit. Loans that are above that limit are considered “Jumbo”.  Generally, a jumbo loan program will have tighter restrictions on income and asset requirements, loan to value ratio, as well as a higher interest rate.

From 2006 through mid 2009 the conforming limit in San Diego had capped out at $417,000.  However, as part of a 2008 congressional bill, the limit was temporarily increased in 2009 for certain high cost areas in the country.  The new limit for a single family home in San Diego became $697,500, and today remains at that amount – for now.

Currently it is easier for qualified buyers to borrow money at those higher amounts, because as previously noted, the rates are usually better for a Fannie Mae loan vs. a Jumbo loan program.

This could all change in September 2011. Fannie Mae recently sent notification that updates to the conforming limit will be announced on August 20th.   No specifics have been published yet, but we are certain that the temporary increase will expire on September 30th and a new lower limit will be established. Most believe the new limit will be lower, but to what extent in San Diego is not yet known.

What does this mean for you?  If you are planning on purchasing a home in San Diego in the near future and you are looking at price ranges that exceed $500,000, then the time is now to start making those offers.  “Carpe diem” people!

Currently “Conforming” rates are about a half percent lower than “Jumbo” rates.  Therefore, if you were to purchase an $800,000 home, and finance 80% ($640,000), a half percent in rate will cost you about $200 per month.  Multiply that over the life of a mortgage and we could be talking about a significant cost if you miss the opportunity to buy a home this summer.

So, seize the day, call me to get pre-approved today! (858) 349-4842

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