The FHA loan limit for lower conforming interest rates was reduced to $625,500 on October 1, this year, which actually moved quite a few prospective Buyers out of the home buying process. Realtors in California lobbied pretty hard to raise the limits back up to where they were previous to October 1, which was $729,750.

What this means is that not only will Buyers in this range get a lower interest rate, but they will only have to put 3.5% down to buy a home in this range. For example, prior to the passage of this measure, if a Buyer only had 3.5% in cash to put down, they could only buy a home up to $648,000. In Marin County and for most of the Bay Area, this really won’t buy a “dream home” and Buyers were limited to whatever was available in the lower price range. With this new measure, a home buyer who puts 3.5% down can afford up to $749,000, which makes a big difference in buying power.

The passage of this extension of FHA insured mortgages will stay in effect until December 2013. It also provides for a short term extension of the National Flood Insurance Program (NFIP) through December 16, 2011. Both the California Association of Realtors (C.A.R.) and National Association of Realtors (N.A.R.) are also pushing Congress to work on a five-year NFIP plan to provide a bill that would promote certainty and avoid further disruption to real estate markets.

There was disappointment that Congress did not extend this new conforming loan limit to either Freddie Mac or Fannie Mae insured loans. There is a strong feeling that they could follow suit later this Spring, so there is still hope. The C.A.R. and N.A.R. have long advocated making permanent higher loan limits.

So let’s see, if you are considering buying a home, why is now the right time?

  1. Home prices have been rolled back to 2001 levels
  2. There are historically low interest rates right now
  3. You can move into a home priced up to $749,000 with only 3.5% down
  4. Home prices have stabilized over the year, and fewer people have had to “bail out” of their homes

Hmmm, I would say it’s an excellent time to make that jump into finding a home versus giving your money away to a land lord, and it’s a great time to sell a home because you will have more Buyers out there looking after these enhanced measures. Let’s face it, homes will not get back up to the high priced levels of 2007 for a very, very long time, and may never get back to those extraordinary high prices. The best a Seller can hope for is a gradual increase of 2-3% over the next several years.

If you need more information about buying or selling a home, give me a call at 415-755-8919 or email me at rsmith@fhallen. com.

Happy Holidays!

Posted by:  Rick Smith