If you’re buying a home $520,000 or below over the next year, you won’t really be impacted by the reduced FHA Jumbo and Conforming Jumbo limits. However, if you’re considering buying a home with minimum down, you’re losing $45,000 of financing power on January 1, 2008 with a $522,100 loan limit.
I wrote an article at Rain City Guide in June about how much home $17,550 can buy you in King, Pierce and Snohomish County with the current loan limit of $567,500. The answer: $585,000 utilizing a FHA Jumbo. Once the new loan limit is in place for our region, the most you can buy with minimum down will be closer to $540,000. Although the new minimum required investment at 3.5% (effective October 1, 2008) will increase the amount required to $18,900 (based on a $540,000 sales price).
Want to do conventional 20% down and stay away the "true jumbo" rates by utilizing the maximum conforming jumbo? Currently, a sales price (or appraised value in the case of a refinance) of $709,000 will get you pretty close to the existing limit at $567,200. As of January 1, 2009, that sales price (or appraised value) is reduced to $652,500 for a loan amount of $522,000.
Refinances may also be impacted depending on what the payoffs are on the existing balances and if it’s classified as a "cash out" refinance (second mortgages not obtained from when you purchased your home is considered cash out) which have tougher guidelines than a "rate term" refinance. Underwriting guidelines continue to tighten and will continue as well.
As always, I highly recommend that if you are considering buying or refinancing in the next year, to contact a local Mortgage Professional at your earliest convenience. The loan limits may not even impact you, it’s never to early to prepare considering our current climate.