For those of you who do not know what these are, we will briefly try to explain with an example. Let’s say there is a property for sale with a price of $500,000. An average buyer will put 20% down and will need to get the rest, 80% (or $400,000) in some sort of loan. Usually the best loan to get is a conforming loan, known for it’s lower interest rates, stability, equity build-up and tax benefits. However, there is a limit, set by HUD (U.S. Department of Housing and Urban Development), on how much money lenders are allowed to lend on a conforming loan. The current conforming loan limit is set at $417,000. In the example above, the buyer could qualify for this loan.
What happens if the buyer could only put down 10%, leaving $450,000 for a loan? Or, what happens when a buyer wants to purchase a house for a $700,000? The buyers could qualify for a conforming loan up to $417,000, but the rest would have to be covered by a second loan or jumbo loans. Normally second loans or jumbo loans are harder to qualify for and their interest rates are higher.
Realizing that our real estate market is in need of some help, HUD has decided to make a change. Starting January 1st, 2009, the new conforming limits for the Ventura County will be $598,000. With a limit that high, 20% down buyers can start looking for home around $747,500 and still qualify for a conforming loan. This will definitely give the housing market a boost.