The following information will impact buyers who will have loan amounts over $417,000 by the end of the summer.
In today’s lending world, there are three different loan size categories. The first of these categories is often referred to as “Conforming.” This category allows for loan amounts up to $417,000 and offers borrowers the best available interest rates. The next loan amount level was temporarily created by the government in hopes of helping to keep interest rates lower for those borrowers who needed a loan size slightly higher than conforming. It is often referred to as “Super Conforming” or “High Balance.” In San Luis Obispo County, the limit for this category is $687,500. Super Conforming loans have a rate just slightly above conforming, perhaps 1/8% to a 1/4% higher. Finally, there are the true “Jumbo Loans” which fall above the $687,500 mark. Jumbo loans can go as high as $2.5 to even $3 million depending on the lending institution. The interest rates for Jumbo loans are the highest of the 3 categories and have more strict qualifying guidelines.
The temporary Super Conforming loan limit of $687,500 in San Luis Obispo County, and as high as $729,750 in high-cost areas, is set to be reduced to the permanent Super Conforming loan limits of $561,200 in San Luis Obispo County and $625,500 in high-cost areas on September 1, 2011.
This may be a great motivator for clients that are in a “waiting mode”. Also, good to share is that lenders will begin to have a build up of these loans so to avoid missing the cut-off date of September 1st, it is best to have escrows opened sometime this month.