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Posts Tagged ‘conforming loan limits’

The Federal Housing Finance Agency released the 2009 conforming loan limits on Friday.  The conforming loan limit is the maximum loan amount that both Fannie Mae and Freddie Mac will purchase from banks.  Loan amounts higher than their guidelines are referred to as non-conforming and typically have higher interest rates and stricter guidelines.  These loans are often referred to as jumbo mortgages.  Each year, the housing market is assessed and a conforming loan limit is determined based on the data. 

The new conforming limit for single unit properties nationally will remain where it has been for the past three years at $417,000.  While I hoped Chicago would be considered a high cost area and see a higher conforming limit, it is some what good news that the conforming limit has not been lowered.  What this means for Chicago home buyers is that in order to get the best financing terms, you generally will want to get a mortgage that is $417,000 or less.

In certain high cost areas, the limit will be a maximum of $625,500.  This is bad news for areas that have been hard hit by the housing market crash such as California.  Earlier this year, the conforming loan limit was temporarily raised to $729,750 in most areas of California making it easier for qualified borrowers to get mortgages at reasonable terms.  Now that the high cost conforming limit has been lowered, it is going to continue to put additional downward pressure on home prices in those areas.  A lower high cost conforming loan limit means there are less people in the market to buy higher priced homes which means home prices have to come down further in those areas.

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