Any relief in sight for California home buyers seeking a mortgage?
Many had hoped that the Federal Housing Enterprise Oversight would adjust the conforming loan limits from $417,000 to something a tad higher. It did not happen as the limit will stay put at $417,000 for 2008 and may even adjust downward in 2009. California’s only hope is for the US Senate to designate the state of California as a ‘high cost’ area. This will allow borrowers in California to receive conforming rates on purchases and refinances for as much as 150% of the national conforming rate.
Borrowers who are unable to get conforming rate mortgages usually get stuck with higher interest rates. Higher interest rates in an area where many buyers cannot even afford the median home price of $568,130 (third quarter 2007 median price in California), make affording a home that much more difficult.
If a family was looking to buy a home at the median price of $568,130, they would end up with a non-conforming loan called a jumbo loan if their down payment was less than $151,130. While existing homeowners are able to cash out their equity for a down payment on a new home, first-time buyers are unable to cough up that kind of cash to get the conforming rate. If the interest rate on the mortgage is just 1% higher because it is considered a jumbo, that could amount to an additional $450 extra per month in interest payments.
The US Senate needs to know that the people of California need changes made to protect our real estate. Making it more affordable to own a home by means of adjusting the conforming loan limit is one step of many that are necessary. The House has approved HR1427 which would modify the conforming loan limit in California similar to Hawaii and Alaska. Call upon your congress to swiftly pass HR1427 and get things moving in the right direction for California.
Borrowers who are unable to get conforming rate mortgages usually get stuck with higher interest rates. Higher interest rates in an area where many buyers cannot even afford the median home price of $568,130 (third quarter 2007 median price in California), make affording a home that much more difficult.
If a family was looking to buy a home at the median price of $568,130, they would end up with a non-conforming loan called a jumbo loan if their down payment was less than $151,130. While existing homeowners are able to cash out their equity for a down payment on a new home, first-time buyers are unable to cough up that kind of cash to get the conforming rate. If the interest rate on the mortgage is just 1% higher because it is considered a jumbo, that could amount to an additional $450 extra per month in interest payments.
The US Senate needs to know that the people of California need changes made to protect our real estate. Making it more affordable to own a home by means of adjusting the conforming loan limit is one step of many that are necessary. The House has approved HR1427 which would modify the conforming loan limit in California similar to Hawaii and Alaska. Call upon your congress to swiftly pass HR1427 and get things moving in the right direction for California.
We currently own a home, I was laid off when the mortgage industry crashed. We currently cannot make the payments and the lender is giving us no alternatives at all. We cannot refinance as all property values have dropped. in trouble at Christmas
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The problem is the home prices not the loan limits. You point this out very well, "...many buyers cannot even afford the median home price..." If anything, it seems to me that loan limits need to be lowered. I think this is really just simple economics in that the price has exceeded demand and inventory is rising. The last thing we need is to put buyers on the hook to pay back even more money when it is clear that people cannot afford these prices even with conforming rate mortgages. What's next, increase loans to 60-year terms? Your lobby is insane for buyers and probably mortgage companies too. At the same time, it sounds great to sellers and real estate agents like yourself, just keep them prices up baby!
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I am not sure what all of HR1427 encompasses, but I am for them allowing a larger percentage of a home to be financed on a conforming loan if borrowers can make the payment. That said, lenders should not make offers to people who do not qualify and buyers need to beware of some of the crazy terms that have sprouted up over the last 5 years during the California real estate boom.
Furthermore, I do not want the President to offer legislation mandating that lenders not raise their rates to the jumbo rate after Jan 1, 2008 and keep their rates on these loans flat for 5 years because it would be unfair to those people who already lost their homes. Additionally, such legislation will likely cause lenders to raise their rates on conventional loans to make up for their losses, which is unfair to those of us who were not foolish enough to over-extend ourselves and may want to sell and upgrade our homes for a reasonable interest rate. I also believe the proposed legislation by President Bush will falsely postpone the markets bottoming out. It appears we are within two years of bottoming out in the California real estate market. Once all of the foreclosures are done, the market will re-adjust as IT ALWAYS HAS re-adjusted. The government needs to let what will happen with current mortgages happen.
Perhaps what might be beneficial for all is to provide educational programs to potential home buyers/mortgage borrowers so that they are less inclined to become "victims" of less than scrupulous lending practices in the future.
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