Conforming Loan Limits

BankAs you’ve undoubtedly been made aware, Congress has passed an economic stimulus package that, among other things gives checks for $600.00 to many individuals and $1200.00 to many couples. This story got lots of press last week and was signed by the President earlier today. What seemed to have gotten lost a bit in this package, at least as far as I was concerned, was the much larger issue of the Fed raising the conforming loan limits.

Starting in 1970 Fannie Mae was authorized by the United States government to purchase residential mortgages. Fannie Mae worked with Freddie Mac to develop uniform mortgage documents and national standards for what would become known as conforming loans. Because these loans are insured by these agencies and are repackaged into the secondary mortgage market it makes the demand for them to be greater than non-conforming loans. The limit for these loans has been $417,000 and because of our very pricey area a huge number of loans given here are Jumbo loans…meaning anything over $417,000. Since the “Mortgage Meltdown” last summer it’s been very difficult for lenders to package and sell Jumbo loans and thus Jumbo loans have been more expensive to get.

Inside the stimulus package is a provision to raise the $417,000 limit to a level of $729,000 in Foster City and other Bay Area communities. This will allow many people to refinance and/or purchase homes with a significantly better interest rate and should really stimulate our market. The increase will only be available for 1 year.

Several steps must occur before these loans will be available to us including:

1. Fannie Mae & Freddie Mac must assess their internal impact to determine the delivery approach the will require of mortgage lenders and investors.

2. They must then communicate these requirements to mortgage lenders and investors.

Bottom line…it’s going to take awhile for this bureaucracy to swing into action. Here’s some other things to consider:

These increases are temporary.

The $729,000 loan limit is not nationwide, it’s going to be available here but if you have investment property outside of the Bay Area the limit will probably be lower there.

The lending environment that will surround these new conforming loans will still not resemble the market of a few years ago in that the lenders requirements are going to be stricter. We still won’t be seeing zero down, stated income subprime loans…and that’s a good thing! It’s a good idea to talk to your lender and get more details on how this program will affect you. I think it’s going to be a big benefit for everyone in Foster City.


  1. I totally agree with Jim on this. The Economic Stimulus Package is being seen by “money guys” as being more like a caffeine fix … it will have impact over a 6 month period, but beyond that, you’ll need another “fix”. There was so much discussion about the $600 / $1,200 tax rebate, probably because it had more of a nationwide impact than the conforming loan issue. But for those of us here on the Peninsula, the biggest lasting impact I see is the conforming loan rates increasing to $729,750. That not only helps new homebuyers try to get into the market (and thus generating home sales and, thus, property values and property taxes), but will also help us exsting home buyers looking to make our dollars go further. If this thing goes through, I’ll be able to save about $300 per month on my mortgage payments … that will outlast the one-time $1,200 tax credit (married) for a long LONG time!

    Steve T in FC

  2. The word on the street is that the new conforming limits may affect only 30 year and 15 year fully amortized loans. There is a possibility the 5/1 arm loans may be offered as well. At this point, no one knows if the pricing may be higher on loans with these new limits. It is a good idea to submit a loan package to a reputable lender in the anticipation the numbers work for you. We are taking loan applications put not submitting them unless we get the go ahead from the borrower. There will be a backlog so it is a good idea to get ready. I have 20+ years in the lending industry.If you would like to call me, I can be reached at 650-524-7241 or my cell at 650-703-4814.

  3. Wow, that’s really interesting about the fully amortized loans! I sure hope they include the ARM’s too. thanks for the update!

  4. I don’t see the increase in conforming loan limits as much of a help. As Jim says, it will take a while for Fannie Mae and Freddie Mac to crank up their ability to handle the larger loan limits. In the meantime, as the Feds have lowered short term rates and the unemployment numbers are not too bad right now, more indications of inflation will be evident. Higher inflation coupled with the likely large increase in demand for conforming loans will cause the rates for conforming loans to go up. Thus, by summer time and on through the end of the year you’ll see the rates on conforming loans go up. If you havea Jumbo loan and want to refi, do it now as the rates for all but the 15 and 30 year fixed rate loans are great right now.

  5. Laura Cooper says:

    I’m hearing that the increased loan amount from 417,000 to
    729,750 will be looked at as “Jumbo Lite” as investors
    will evaluate the risk in this market compared to the secondary market that is used when combining 417,000 plus a second. Also hearing interest rates aren’t suppose to be much of a reprieve from the current jumbo loans……..
    I’d like to remain optimistic and lean on past history that
    when something new comes out and it catches on the banks
    will start competing for the business and hopefully the interest rates will become reasonable for this product and
    stir buying and re-financing opportunities.

  6. Congratulations San Mateo County…

    No surprise that San Mateo came in at the max, $729,750 for Single Family Homes. The link below should take you to the HUD site – if not, give me a call at 415-425-0857 and I can pull up other areas for you.

    INVESTORS…. Don’t forget, the limits have also been increased for 2 – 4 Units as well. YES, these day’s you need 25% (or more) down payment, great credit and reserves. GOOD… let’s get this market stabalized!

    2 Units $934,200
    3 Units $1,129,250
    4 Units $1,403,400

    For More Information visit my website and click on on of the FREE REPORTS where you will find articles about the New Loan Limits, Saga of the US Mortgage Industry, Understanding the Fed’s Role and more…

    Jana M. Lane, CMPS®
    Own Real Estate Right
    (415) 425-0857 direct

  7. Hey Jana;

    When will those new Conforming loans be available for borrowers in this area. How long do we have to wait?

  8. Victor Solorzano says:

    What are the best rates for Jumbo loans right now?

  9. Somehow your comment got lost in the spam file and I missed it until today, sorry! In your case it’s smart to wait for the conforming change because you’ll be within the new limit and can refi that way…you won’t need a jumbo. It may be a month or so away it seems.

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