The Economic Stimulus Package that was signed into law included an immediate increase in both the FHA and conforming loan limits to as high as $729,750 in our high cost LA Beach neighborhoods.
This means that the interest rates on many mortgages will go down because these loans are now eligible to be purchased by Fannie Mae and Freddie Mac or insured by the Federal Housing Administration (FHA). Previously, the FHA was only allowed to insure loans with balances lower than $200,160 - $362,790, depending on the county where the property was located.
What does all of this mean for you?
Previously Fannie Mae and Freddie Mac were only allowed to purchase loans with balances at or below $417,000. This resulted in limited options and higher financing costs for those with loan balances above
these limits. The new law substantially increases these limits in high cost areas and opens up new options and lower financing costs for many people.
There is some confusion because the bill has a provision that says the higher limits are only effective for loans originated between July 1, 2007 and December 31, 2008. In short, the reason it is effective beginning July 1, 2007, is because the credit crisis started to unfold in July and August of 2007. Mortgage market conditions rapidly deteriorated almost overnight. Many secondary market investors suddenly refused to purchase loans that couldn't be sold to Fannie Mae and Freddie Mac.
However, the July 1, 2007 date has no bearing whatsoever on new refinance transactions! In other words, it doesn't matter when the loan you are refinancing was originated. The old loan could have been originated in 2005, 2006 or anytime before or after July 1, 2007 and it would have no effect whatsoever on your current purchase or refinance transaction. If you are financing a new loan today, whether it is a purchase or refinance transaction, that loan is subject to the new limits set forth in the bill.
The other date of December 31, 2008 means that the old limits will go back into effect after this year. In other words, now is the perfect time to buy a new home or refinance your mortgage because after this year, your costs will be higher and your options more limited again.
This all goes into effect immediately!
However, Fannie Mae, Freddie Mac and various lenders have different policies as to how these loans are priced and underwritten. That is why it is imperative that you work with a Certified Mortgage Planning Specialist who is committed, qualified and equipped to give you timely information and expert guidance every step of the way.
Contact me today for a complimentary consultation. I can look up the new loan limits in your neighborhood and see whether you can save money in any way.
Also, please pass along this update to anyone you know who may be able to benefit, and I'd also be happy to look up the new loan limits in their area and discuss with them whether they could save money.
Joe Ruymen, CMPS®
Certified Mortgage Planning Specialist
Platinum Capital Group
3500 Sepulveda Blvd Suite E
Manhattan Beach, CA 90266
Direct: (310) 303-3486
Fax: (310) 406-3556
Joe.Ruymen@PlatinumCapital.com www.JoeRuymenLoans.com
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