WeeklyBasis 11/10/08: 2009 Conforming Loan Limits vs. Jumbo Loans

Posted by Leslie Bauer on Wednesday, November 12th, 2008 at 10:37pm.

Fixed and ARM rates for loans up to $729k are down about .5% from two weeks ago, which continues a weekly .375% to .5% up/down trend for the past few months. Rates on loans above $729k are consistent because they continue to be priced more on lenders’ willingness to lend than on market forces. Super-conforming loans up to $729k will be phased out between now and December 31 because all lenders—big or small—who make these loans must sell these loans to Fannie Mae or Freddie Mac by December 31.

Most lenders are phasing out high-limit conforming loans by November 20, meaning borrowers must submit a loan today to close it by November 20. If it’s not in by today, borrowers need to go to the next option (because most banks are closed Tuesday 11/11 for Veteran’s Day). The next deadlines are as follows: RPM Mortgage, Citimortgage and GMAC are allowing these loans to be submitted until December 15 and they must close by December 31.

The 2009 conforming loan limits were announced at $417,000, with high-cost areas allowed to go up to $625,500 (which is 150% of $417,000). The announcement says that there is a 30 day appeal period for “those wishing to contest its median price estimates. Appeals are to be based upon data suggesting a potentially higher price median for a given area.”

This is a departure from past years when there was one limit nationwide. Setting loan limits by location is a new process brought about by legislative influence during 2008, and it’s possible limits could go above $625,500 for certain areas because of lobbying efforts or a new economic stimulus package that is widely expected.

If conforming limits remain at $625,500 and a borrower has a 20% down payment, this translates into a $782k purchase price. So it still gets borrowers pretty far even in high cost areas. The spread between super conforming and jumbo 30yr fixed is .375% to .625% depending on daily trading in conforming rate markets. Jumbo ARMs are actually cheaper than super conforming ARMs—but down payment requirements can be 25-30% instead of 20% on jumbo ARMs.

Economic news this week is light with Jobless Claims Thursday and Retail Sales Friday, so market movement will come mostly from credit crisis developments and stock market activity.

Conforming ($200,000 – $417,000) – NO POINTS

30 Year: 6.25%   (6.36% APR)

15 Year: 6.0%   (6.11% APR)

5/1 ARM: 6.625%  (6.73% APR)—See Jumbos for Lower Rates

Super-Conforming ($417,001 to $729,750 cap by county) – NO POINTS

30 Year: 6.625% (6.72%)

Jumbo ($729,751 – $1,500,000) – NO POINTS

30 Year: 7.25%   (7.36% APR)

7/1 ARM: 6.25%   (6.21% APR)

5/1 ARM: 6.0 %   (6.11% APR)

Better rates available for select profiles. Loans shown have no points. Better rates are also available using tax deductible points. Scenarios assume full doc pricing on purchase or rate/term refi (but not cash-out refi) loans for borrower with 720 FICO score or greater, at least 20% equity, and 6-12 months reserves left over after close (retirement assets counted at 70% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. This is not a loan commitment nor a loan guarantee, rates based on loan amount ranges shown and rates available at the time of production. Rates subject to change without notice. California Department of Real Estate license #01376428. Equal Housing Lender

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