The U.S. Congress passed a congressional resolution extending through 2010 the current conforming loan limits of $729,750 for high-cost areas, many of which are in California. This is huge for the South Bay – a very high-cost area of the United States. $417,000 is the average conforming loan limit in most of the country. $625,000 is the normal high-cost area loan limit, which is still not enough for most home buyers to purchase the type of mortgage they will need for high -cost areas such as the Hollywood Riviera, Palos Verdes, Redondo Beach, Hermosa Beach or Manhattan Beach for example. With the average home costing in the million dollar range – even if the buyer has 25% down – they are left with a mortgage of $750,000 (still above the higher conforming loan limit.) In this scenario, a buyer would need closer to 30% down to make the transaction work with the conforming loan amount of $729,750. This is important because the rates on conforming loans are much lower than those of “jumbo” loans – loans above the $729,750 limit.
Here is a copy of the press release on October 30, 2009 by C.A.R. (California Association of Realtors)
For release:
Friday, Oct. 30, 2009
Extension of conforming loan limits through 2010 earns praise from C.A.R.
LOS ANGELES (Oct. 30) €“The U.S. Congress late yesterday passed a congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including many in California. President Obama is expected to sign the resolution today or tomorrow as part of a broader piece of budgetary legislation that will prevent a government shutdown.
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits. As a result of C.A.R.€™s and NAR€™s efforts, a provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits from $625,500 in high-cost areas to $729,750 and extending the limits through 2009. Yesterday€™s actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.
€œThere is no doubt that higher loan limits and the federal tax credit for first-time home buyers have helped stabilize California€™s housing market over the last year,€ said C.A.R. President James Liptak. €œC.A.R. applauds our congressional representatives for their actions to extend the higher loan limits through 2010. They now should focus on making higher loan limits permanent.€
The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or €œguarantee.€ Non-conforming or €œjumbo loans€ typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.
Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with nearly 163,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.