Jumbo Mortgage Rules are Changing This Year

If you are considering getting a home with a jumbo mortgage this year, you need to act quickly. The two major mortgage securers – Freddie Mac and Fannie Mae – are going to reduce the mortgage limits that they will secure beginning on October 1, 2011. That gives you about five months to find a home with a jumbo mortgage and close on it if you plan on having it backed by the federal government.

The maximum limit that Freddie Mac and Fannie Mae will secure right now is $729,750. That is going to be reduced to $625,500 on October 1. As a result of this change, mortgages may become more expensive and even more difficult for buyers looking for mortgages that are above the new limits. A $700,000 mortgage will be harder to come by for buyers who do not make a down payment of at least 10 percent. Even then, lenders may be less willing to loan more than the $625,500 to buyers even if they have great credit.

These new rules mean that buyers will have to come up with larger down payments for the more expensive homes. A home that costs $1 million, for example, will require home buyers to increase their down payment from $270,000, which it would be right now, to $370,000, which it will be after October 1. On the bright side, the higher end real estate market is beginning to pick up. Realtors are reporting that they are having more success in recent months in the more expensive market than they have had in recent years. In fact, according to the National Association of Realtors, sales of homes that are in the $1 million market and above have increased by more than 5 percent in the last year. The study compared the sales figures in March of this year to the figures in March of 2010 to arrive at that conclusion.

Some analysts in the mortgage industry are expecting private mortgage lenders to pick up where Freddie Mac and Sallie Mae are leaving off. Realtor Linda Chaletzky stated that the mortgage industry will need to find a way to deal with these new rules because they will go out of business if they don’t.

However, jumbo loan limits were not always as high as they are now. It wasn’t until 2008 when those limits were increased. Before 2008, any mortgage that exceeded $418,000 was deemed a jumbo loan. But the stimulus package of that year saw Congress raise those limits not once, but twice. The first time the limits were raised to $625,000 and the second time the limit was raised to $729,750, where they are right now until October 1. These limits were only meant to be temporary anyways so lowering them back down to $625,000 should not raise much concern or controversy. It’s just something that buyers should know about if they are planning on buying a higher end home in the near future.

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