Real Estate NEWS

Congress passed the economic stimulus package last week and the President is expected to sign it today. This means most of us will be getting a check from Uncle Sam in the next few months for a couple hundred bucks and that the conforming loan limits will be increased. The FHA loan limits will be increased as well. There is much anticipation around these increased limits but many of the details have yet to be worked out.

The new loan limits will be calculated at 125% over the median home prices for DC area; however, it is yet to be announced whose data they will use to calculate the median and if they will use the median prices from 2006 or 2007. Most data supports median sales prices for our area in the mid to upper $400,000s. If they use the numbers from the Federal Housing Finance Board, the median is $475,000 so our new limit would be in the neighborhood of $593,750.00.

Meanwhile, Fannie and Freddie have to figure out how to implement the changes and bring them to the market. We should not expect the loan limits to be increased and pricing and underwriting criteria to remain the same on those larger loan amounts. The general consensus is that the increased loan limits will have a rate add-on of .25% to .50% over the loans at the current $417,000 loan limit. In spite of the rate add-on, this is still an improvement over current jumbo rates, which, at times, have been as much as 1% higher in rate. Once Fannie and Freddie decide how to implement the higher loan amounts then the lenders have to decide how they will implement and ready their systems to accept/process applications at the new limits.

The increased limits will remain in effect only until the end of 2008 and some speculate that the new limits won’t hit street level until June by the time all is said and done. No matter how long it takes, it will still be a boost for borrowers looking to borrow more at lower rates and lenders who have been waiting to unload securities (at the higher loan limit) to free up cash flow.

Recognizing that this process may take some time, we are encouraging people to act now (not wait for the increased limits) while rates are low and housing inventory remains and then we can always refinance them later if the benefit presents itself. Acting now might afford a purchaser the opportunity to buy now before the increased loan limits have a positive effect on housing values.

We will continue to keep you updated as information presents itself.