Friday, March 07, 2008
After much anticipation, the US Department of Housing & Urban Development (HUD) finally announced the new conforming and FHA loan limits. The Washington DC metro area will have a loan limit of $729,750 and the Baltimore area will have a limit of $560,000. These new limits apply to both conforming and FHA loans (previously the conforming limit was $417,000 and the FHA limit was $362,790). Most attention will be given to the fact that many loans that were previously "jumbos" will now be conforming -- which means they will now have an interest rate that is dramatically lower (currently over 1% lower). But this expanded availability of lower rates, in my opinion, is not the primary benefit of HUD's much needed action.
More important is that down payment requirements and other underwriting standards are much more lenient on conforming and FHA loans. As an example, the down payment required on an FHA loan can be as little as 3% -- as compared to "jumbos" that now often require at least 10% down. Lower down payment requirements will provide a huge shot in the arm to our real estate market, where entry level homes in some sub-markets easily exceeded the previous conforming and FHA limits. At Sawbuck, we know first hand that our region has an extremely high number of young professionals with great income and credit -- but who understandably have not yet saved enough money to buy a home under current "jumbo" guidelines. HUD's new loan limits are a welcome change for these folks, not to mention home sellers who for the first time in many months could start seeing more prospective buyers coming through their homes.
