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Time to Refinance Your Mortgage? Conforming Loan Limits Are Likely to Revert to $625,500 Nationwide

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The maximum amount for a conventional loan mortgage not to be considered a jumbo loan mortgage is set to change on October 1, 2011. What does this mean for you?

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If you have been keeping up with the real estate news, you may know that the conventional mortgage loan limits set by Congress in 2008 are about to expire.

A conventional conforming mortgage is one that is eligible to be sold to Fannie Mae or Freddie Mac.  One of the requirements for a mortgage loan to be a conventional conforming loan is that the home is valued beneath a limit currently is between $417,000 and $729,750.  Homes valued over the limits are jumbo loans which involve tighter credit restrictions, higher equity down payments and possibly higher mortgage rates.  Beginning October 1, 2011 the convenional mortgage loan limits for homes across the entire country may revert to $625,500.

Currently, the maximum amount for conventional mortgage loans is between $417,000 and $729,750, depending of several factors, including the region of the country in which you live.  Major metropolitan areas, where home prices are higher, today have limits closer to $729,750.

According to Mathew Carson of First Capital Group Inc., there are many people who will be affected by the new limits.  Any homeowner who owns a home valued between $625,500 and $729,750 and wants to refinance, as their loans will likely fall into the jumbo category.   Carson said that his company is reaching out to its clients who will be affected to alert them of the new guidelines.

Most affected will be homeowners in cities like New York City, San Francisco, Miami and Los Angeles where homes are typically priced above the conforming mortgage loan limit range.  The lower limit in these areas will cause more home mortgages to be treated as jumbo mortgages going forward.  According to the National Association of Home Builders, nearly 1.4 million owner-occupied homes in more than 200 counties across the county will be valued above the $625,500 conforming loan limit.  Conversely, many in rural areas who had been subject to lower conventional loan limits close to $417,000 will now be able to obtain conventional loans more easily on home priced up to $625,500.

The Federal Housing Administration, or FHA, changed the limits for a conventional loan in 2008. While the change was intended to be temporary, Congress has voted in each year to renew the current limits.  It seems quite possible that Congress will not take action to renew the higher limits before September 30, 2011, causing the current limits to expire and the pre-2008 $625,500 conforming loan limit to return nationwide.

So what does this mean for you? If you are thinking of refinancing your mortgage loan or taking out a conventional mortgage loan to purchase a home valued between $625,500 and $729,750, now may be the best time to initiate the process. The opportunity may be quite different after October 1.

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