Do Lowered Loan Limits = Higher Interest Rates?

Do Lowered Loan Limits = Higher Interest Rates? - Ask an Expert Series

Is it true the conforming loan limits are going to be reduced soon?

Signed, Confused Borrower.

We asked Margaret Ashwell, Senior Loan Consultant of Guarantee Mortgage.Margaret has been in the mortgage brokering business for many years funding millions of dollars worth of San Francisco property.

Dear Confused Borrow,

The increased credit limits implemented by the 2008 Economic Stimulus Package are decreasing on January 1, 2009 to $625,500. It’s true! The conforming loan limit had been $417,000, but it was raised in 2007 to $729,750 so people buying property in more expensive areas, such as San Francisco, could qualify for lower interest rates. Some lenders are already preparing for the new reduced loan limits by terminating the old limit by as soon as December 1. Therefore, escrow must be closed on or before the first week of December 2008 to comply. What does this mean? Interest rates will revert back to a two-tiered system in which the lowest interest rates will be for conforming loan amounts of $625,500 or less. The conforming loan limits for 2-units will be $800,775, for 3-units $967,950, and for 4-units $1,202,925.

Signed, Margaret Ashwell, Senior Loan Consultant, Guarantee Mortgage
415-345-4348 mashwell@gmwest.com

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