Jumbo mortgage deadline looms
|By Holden Lewis Bankrate.com
Some mortgage borrowers are about to get squeezed by the shrinking of something called the jumbo conforming limit.
In the country's priciest housing markets, including
Los Angeles, San Francisco and Washington, this year-end
change means that borrowers need to act fast if they want to
get a home loan between $625,500 and $729,750. A similar change
affects other areas, too, but not necessarily with the same dollar
amounts. The change in the jumbo conforming limit affects purchasers
as well as refinancers.
Time is of the essence because it takes a few weeks not only to process a loan from application to closing, but to sell it on the secondary market after closing. At this late date, it's better to skip the middleman and apply directly with a lender instead of through a mortgage broker.
Some lenders wanted these loans to be closed by mid-December
or even earlier. Bank of America's deadline was Nov. 13 for a rate
lock under the 2008 loan limits. Citi's deadline was Dec. 9.
But some lenders might still be accepting applications.
Matt Hackett, underwriting manager for Equity Now, a New York-based
direct mortgage lender that does business in 17 states, says his
company can close jumbo conforming loans through Dec. 31. A spokesman
for Chase says it will accept rate locks all the way to Dec. 31
for loan closings early next year. Told that this sounded hard to
believe, the spokesman insists it is true.
Why conforming is good
Until this year, mortgages could be divided into two categories
defined by loan amount. Mortgages for $417,000 or less were within
the conforming limit, meaning that they potentially were eligible
for sale to Fannie Mae or Freddie Mac. Anything over $417,000 was
a jumbo loan and ineligible for sale to Fannie or Freddie. The distinction
matters because jumbo loans have higher rates. Since the credit
crunch began 15 months ago, jumbo rates often have been more than
a full percentage point higher than conforming rates.
As part of the economic stimulus package this year, Congress adopted a new, in-between category of mortgage for a few dozen counties where houses are most expensive. It's called the jumbo conforming loan, and the limit varies by county.
In the priciest places, such as Los Angeles, the jumbo conforming limit was raised temporarily to the maximum possible of $729,750. In other counties, where house prices are high but not as high as in L.A., the jumbo conforming limit is less. In Boston, it's $523,750; in Philadelphia, it's $420,000. And in most counties, where houses are more reasonably priced, there are no jumbo conforming loans, and the line between conforming and jumbo remains $417,000.