In California, the High Balance Conforming loan limit is $697,500. Push your loan amount up to $700,000 and you can expect to pay an additional 2 points, or 2%, to keep the same rate. Fannie Mae loan limits for High Balance Conforming mortgage loans are scheduled to expire on September 30, 2011. Going forward, San Diego County will have a High Balance Conforming loan limit of $546,250.
Who does this affect? Anyone hoping to refi or purchase a home and finance between $546,250 and $697,500. All of these borrowers will be pushed from the High Balance Conforming category to the Jumbo loan category.
What is the anticipated effect? The spread between High Balance and Jumbo pricing is currently at about .75%, meaning if you want to pay 0 points, you can get a 30yr High Balance loan for 4.375% or a 30yr Jumbo loan for 5.125%, with the Jumbo rate being .75% higher.
For a $1,000,000 home value, a $697,500 Loan (High Balance) would be financed at 4.5% with a borrower credit of .25%. For the same home value, a $700,000 Loan (Jumbo) would be financed at 5.25% with a slight credit. If you want the 4.5% rate for the Jumbo loan, you would have to pay 2.5 points (2.5%) in fees. Ouch.
Effective 9/30/11, Loan amounts in excess of $546,250 are subject to the Jumbo Loan pricing.
Bottom line: If you fall into this category, which roughly 20% of my clients do, give me a call to discuss your options.
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