How To Plan Ahead For The New, Lower Conforming Mortgage Loan Limits in 2009

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Conforming mortgages are limited by loan size, based on average housing costs around the country.  Since 1980, as home prices have increased, so have conforming loan limits.

The current conforming loan limit on a single-family home is $417,000.

Earlier this year, as part of the Economic Stimulus Act of 2008, Congress authorized temporary increases to the conforming loan limit in high cost regions, as defined by median home sale price. In Manhattan, for example, where more homes sell for more than a million dollars than sell for less, mortgages as large as $729,750 are considered "conforming". 

Beginning in 2009, however, that loan limits changes.  Effective January 1, conforming mortgages will be capped at $625,500 in high cost areas, and $417,000 everywhere else.

Therefore, homeowners in high cost areas whose mortgaged amounts exceed $625,500 are now operating on a defined timeline.  Switch to a cheaper conforming home loan prior to December 31, 2008, or risk paying the "jumbo premium".

This includes homeowners with:

• Two mortgages -- one for $417,000 and one for "the difference"
• An ARM that was begrudingly accepted because jumbo fixed rates were too high
• An expensive jumbo fixed rate mortgage

In addition, home buyers in the $800,000-900,000 price range may want to move up their closing dates.  Today, at those price levels it takes a 20 percent downpayment to get access to conforming money.  In 2009, it will take 30 percent.

To lookup your area's conforming loan limits, visit the HUD Web site, or email me for help.  The loan limit charts aren't terribly intuitive.