Proposal To Raise Conforming Loan Amount
As part of the Economic Stimulus Package being considered by the administration and by Congress, there is a proposal that would be a great boon to the housing market in the Washington, D.C. area – that is the increase in the conforming loan amount. Depending on what you read, this amount (which is currently capped at $417,000) could temporarily increase to $625,000…or even more.
My understanding is that the temporary increase would be different for different parts of the country. Where housing prices are more expensive, the loan limit would be allowed to go higher than where housing prices are less. This makes great sense and, even if the increase is only temporary, it seems that” the powers that be” should give consideration to the fact that housing prices in our country vary tremendously. In some locales, the $417,000 limit makes sense and leaves only the very wealthy having to deal with a “jumbo” loan. But, for real estate in areas like Bethesda, or Chevy Chase, or Potomac or many areas of Washington, D.C., a conforming loan just doesn’t do the trick and one of the fallouts of the subprime crisis is the increase in jumbo rates. Currently, in our market, there is a one point difference between conforming and jumbo rates – and that adds up quickly over the years of a mortgage.
An increase in the conforming loan amount would be extremely helpful to Washington area home buyers. A recognition by our government that the cost of housing in our country varies dramatically and that this should translate into varying loan programs is also extremely important. Even if the former is a temporary fix, the latter may just be the beginning of government programs that benefit buyers in more expensive markets.