This Wednesday by signing HR 5140, President Bush will increase the conforming loan limit. The new limit will be 125% of the median home price in the region. “Region” is yet to be defined, as HUD has 30 days to publish the numbers for each region. I don’t know if this will be based on zip code or metro area. However, it must be noted that the max loan limit is set to $729,750.Â
This is significant because zip codes within the same area can have wildly different median home prices. For example the Scottsdale region of the Phoenix Metro area had the following median home prices (Q2 2007):
- Zip Code: 85250 Median Price: $260,000Â
- Zip Code:Â 85257 Median Price: $232,500Â
- Zip Code: 85259 Median Price: $669,000Â
- Zip Code: 85262 Median Price: $1,013,329
We will have to wait 30 days from when President Bush signs the bill to when HUD publishes the median price for each region to know exactly what the conforming loan limit will be for the Phoenix Metro area. It should be noted that the new conforming limits expire on December 31, 2008. Meaning January 1st next year we’re back to $417,000.
The biggest impact of the new conforming limit will be on interest rates. Traditionally jumbo mortgages have been more expensive (higher interest rates) so wrapping some of the jumbo loans under the conforming loan limit will make higher priced homes a bit more attractive. However, I don’t anticipate jumbo rates to fall to the conforming loan limit. I would imagine that there would be some form of price adjustment for loans greater than $417,001 but below the new loan limit.