Isi Wu, The Realtor for You

The big news this week is that conforming loan limits are up, Up, UP in San Francisco and the rest of the Bay Area-- President Bush signed the economic stimulus bill into law today – and for us, the most important piece of the legislation is the increase in conforming loan amounts to $729,750.

Until now, conforming loan amounts were limited to $417,000—a negligible amount in San Francisco and the Bay Area where the median home price is around $725,000 (this figure factors in TICs and condos along with single family homes).  An 80% first mortgage on a purchase of this size would be at least $580,000 unless you had an unusually large down payment.

A conforming loan is a fixed rate loan that is packaged for resale on the secondary mortgage market to Fannie Mae or Freddie Mac, two quasi-governmental agencies that buy mortgages from cooperating lenders. Both agencies set limits annually on the size loans they'll buy.  This guaranteed market for conforming loans leads banks to offer lower rates on them-- usually they run about 1% lower. Adjustable rates on conforming loan amounts also run lower by about ½ a percent. 

Although the increase in the conforming rate is good news, it may take a bit of time before most lenders start offering lower rates on larger loan amounts. There’s a chance that some will start making larger loans at conforming loans right away, but most lenders offering the best rates will be more cautious as they wait for guidance from Fannie Mae/Freddie Mac on how the loans will be bought.  And as always, the best loans go to the most qualified-- conforming loans tend to have the most stringent criteria. If your credit is shaky or you have been job-hopping in recent years, you may have to pay a higher interest rate.

There's no such thing as a "stupid real estate question".  If you are curious about some "little thing" or if you have a friend or relative who needs straightforward answers, just give me a call.  I'll be happy to answer your questions.