3 Oceans Real Estate, A Boutique Real Estate Brokerage Serving the San Francisco Bay Area header image 2

Eliot Spitzer and Making Sense of the New Conforming Loan Limits

Eric Trailer, Mortgage Banker, Absolute Mortgage Banking

March 18th, 2008 · 5 Comments

If you’re Eliot Spitzer, probably three feelings come to mind: panic, disorientation and regret.  But if you’re a potential home buyer in the Peninsula region of California, you have good reason to feel excited, encouraged and confident!  Why?  If you read my last post last month, you know that the conforming loan limits for many California Counties are going up and that means cheaper mortgage rates on loan amounts between $417,001 and $729,750.  Now that HUD has made it official that ALL bay Area counties qualify for the revised maximum conforming loan limit, that means potentially big savings on mortgages for qualified applicants looking to purchase single-unit properties up to $810,000 with as little as 10% down!

We’ve all heard the cliche, “the devil’s in the details”, so what are the latest requirements to obtain a conforming loans between $417,001 and $729, 750?  Since I’ll provide you with a link to Fannie Mae website and announcement , I’ll provide you with some highlights that I think are most relevant and let you read further at your leisure:

1. Single-unit properties only

2. Purchase and “limited cash out” transactions only (i.e. no greater than $2,000 going into your pocket upon settlement)

3. If primary residence purchase, up to 90% loan-to-value (”LTV”) allowed if fixed-rate program is selected–700 minimum FICO(R) required; 80% LTV if an adjustable-rate loan is selected–660 minimum FICO(R) required; if refinance

4. If second home or investment property purchase, maximum 60% LTV allowed with minimum 660 FICO(R) regardless of eligible loan program selected

5. If refinance, regardless of type of eligible mortgage program, up to 75% LTV allowed, plus subordinate financing allowed in addition up to 20% LTV–660 minimum FICO(R) required

     a. SPECIAL NOTE, consolidating existing first mortgage and subordinate mortgage into one loan NOT eligible AND six  months of “seasoning” (six payments made on existing mortgage) required to refinance!

6. Loans are eligible for origination NOW 

7. Eligible programs include 30-year fixed, 15-year fixed, LIBOR-based 5/1 ARM (amortized and interest-only payments allowed for this program)– more programs may become available

8. Sufficient employment, income and assets must be verified and each file will require manual underwriting– automated underwriting engines not allowed at this time

Again, I do encourage you to read the Fannie Mae announcement from the 6th of March for all the details, but the above are the top highlights.

So what will pricing look like on these “new” conforming mortgages?  Well, pricing has just recently been released by only a few institutions, but it looks like the 30-year fixed is running at about 6.375% and the 15-year fixed is running at about 6.25%.  The 5/1 ARM pricing is expected to be released next month.  What I do think is that pricing may actually get a little better in the short term as more institutions post pricing and auctions are successful with Fannie Mae and Freddie Mac. 

What’s right for you as a would be home buyer on the Peninsula?  That depends of course on your specific situation, and I do encourage you to consult with your trusted mortgage and financial consultant before placing an offer on a home or refinancing your mortgage.  What I can say is that the majority of our clients who are buying or refinancing today are selecting a jumbo 5-year ARM in the mid-5% range due to its balance of savings, security and flexibility.

Tags: , , , , , , , , , , , ,
Possibly related posts

Tags: * Type of Content · Buyer · Buyers · Consumer · Industry

5 responses so far ↓

  • 1 arm // Mar 18, 2008 at 6:09 pm

    Is the new jumbo 5-year ARM currently really in the mid-5%?

    Earlier in the article you mention that pricing is expected to be released only next month.

  • 2 Val // Mar 19, 2008 at 8:20 am

    Thanks for your post.

    It should be a must read for anyone in the residential real estate business in California.

    Excellent summary of what will undoubtedly will be come the primary loan of the future.

  • 3 Eric Trailer, Mortgage Banker, Absolute Mortgage Banking // Mar 19, 2008 at 8:43 am

    Hello “arm”,
    Our current jumbo 5-year fixed is in the mid-5% range, and it is a straight jumbo loan. And yes, the conforming 5/1 pricing for loans between $417,001 and $729,750 should be released next month.
    Thank you for reading.

  • 4 Eliot Spitzer and Making Sense of the New Conforming Loan Limits « Don Diltz’s Weblog www.MidPenRE.com // Mar 21, 2008 at 10:40 am

    [...] 18th, 2008 · 3 Comments If you’re Eliot Spitzer, probably three feelings come to mind: panic, disorientation and [...]

  • 5 Brian // Mar 28, 2008 at 7:07 am

    I know this is a great in theory, but the interest rates are not being brought down by the banks. Yes, the banks are seeing savings from the Feds, but the banks are NOT passing this on to the home buyer. They are only using this to help themselves climb out of their holes.

    We were extremely excited to here the news about this and it would have actually got us off the fence and ready to buy. But from what we are seeing the jumbo rates are not coming down in California. So, now we are back on the fence waiting to see if they actually drop. 1 to 1.5% on a 700k+ is a big savings.

    I guess we watch the market for another 6 months… Love the bay area, hates the home price.

Leave a Comment