Please ensure Javascript is enabled for purposes of website accessibility

Economic Stimulus Package a Reality – Conforming Loan Limits Increased

I’ve got bruises from pinching myself. I’m having a hard time believing that the House and Senate actually passed an economic stimulus package that benefitted San Francisco Real Estate.
Since San Francisco home prices are so high, buyers have had to suffer with higher interst rates on their loans if they needed to borrow more than $417K. However, with the new bill, a loan as high as $729,750 would allow a buyer with 20% down to purchase a home at $912,187 without being hit with exceptionally high interest rates.
But there is a catch. For now, the loan limits will only last through 2008. While there advocates that will be fighting for FHA reform, don’t expect these higher loan limits to be around forever.
That doesn’t mean you need to get out there and buy now if you weren’t already planning on it, but if buying a home is something you thought would be a good idea for you in the next year or two – you might want to strike while the iron is hot and
take advantage of the low interest rates while they last.
For more information, read the article below from the California Association of Realtors, or check out the update from

Thanks in part to lobbying by C.A.R. and NAR members, the Senate passed their version of an economic stimulus package today, Thursday, February 07, 2008. The Senate version expands rebate checks for seniors and disabled veterans and includes the same increases to the conforming loan limits for both GSE and FHA found in the House stimulus package. The House just passed the Senate version of the bill and it will now be sent to the White House. The President is expected to sign the legislation by the end of next week, ahead of the Congressional self-appointed deadline of February 15th. The increase in the conforming loan limits will last through 2008, but C.A.R. and NAR continue to lobby for FHA and GSE reform, making these increases permanent.

The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas. By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably.

Increasing the FHA loan limits is critical to bolstering California’s housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.

Additionally, raising Fannie Mae and Freddie Mac’s (GSEs) conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on current housing markets. For instance, increasing the GSE loan limit could result in more than 300,000 additional home sales and strengthen current home prices by 2-3%.

The critical role that GSEs play in providing liquidity to the mortgage market has never been more evident than it is today. The national subprime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.