Late yesterday, President Obama signed a resolution that included a provision extending through fiscal year 2011 the current conforming loan limit of $729,750 for high-cost areas, including many in California. The same limits will also be extended to loans insured by the Federal Housing Administration.
Without the extension, which was set to expire at year’s end, FHA loan limits would have dropped by as much as 50 percent in some areas, and the conforming loan limit would have dropped by about 40 percent.
The initial law temporarily raised the conforming loan limits from $417,000 to $729,750 in high-cost areas and extending the limits through 2009. Yesterday’s actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through Sept. 30, 2011.
In effect, this allows buyers to purchase homes with loans as high as $729,750. These loans sometimes require no more than 3%. Most loans with less than 20% down-payment require mortgage insurance. MI will rise from .55% to .85% in October. Moreover, the new minimum down-payment may be lower than 3%. Therefore, some loans the government will underwrite more than 100% of the purchase price adding closing costs and etc.
