The Trickling Down of the Increased Limits

The banks have begun to put out their own guidelines for the new "Jumbo Conforming" loans. Each has slightly different criteria, most are offering more options and flexibility than Fannie Mae (like you can get a cash out on a refinance with some) but there are certainly costs associated with any choice that makes it a riskier loan.

It truly is a different picture for each person, as each person's financial picture is different. For advice specific to your situation, please consult a professional who is well versed in this continually changing market.

Feel free to leave a comment below if you're buying or refinancing in the Bay Area and need guidance.

Jumbo-Conforming Guidelines

Well here we are with guidelines for the new jumbo-conforming ($417,000-$729,750) loans. Granted there's been a definite flight to quality in terms of the loans banks are willing to give, but the highly anticipated increased conforming limits don't look like they're going to be the saving grace people were hoping for. Here's what we're looking at:

• Full documentation only. All income must be verifiable with W2 forms, tax returns, pay stubs; assets must be verified with bank statements
• Available programs are 15 and 30-year fixed rates (no 40 year terms here) with fully amortizing payments, or a 5-year fixed program with either fully amortized or interest only payments (still, borrowers will have to qualify for the interest only payment by proving they can make a fully amortized payment on the same loan)
• One unit properties (no duplexes, triplexes, apartments, etc.)
• No cash out on refinances -- any refinance must be for a better rate and/or terms only (however, generally banks don't consider a nominal amount of cash received to cover closing costs, usually $2,000 or less, a cash out loan)
• Home buyers will have to put a minimum of 10% down
• Refinances will have a maximum loan to value of 75%
• Debt-to-Income ratio is a maximum 45%
• Minimum FICO score 660 (however, if you're buying a home with less than 20% down payment, you'll need a 700+ FICO)

These are the guidelines as per FannieMae which we expect the big banks to adopt in their lending as well. These products are not yet available commercially (with the big banks, BofA, Wells, WaMu, Citi, etc.), but now that FannieMae has released their guidelines the banks should follow suit fairly quickly.

BREAKING NEWS

FHA just announced the increased conforming loan limits and as expected, our Bay Area counties (SF, Alameda, Contra Costa, & Marin) have the maximum limit of $729,750! That will stay in effect until December 31, 2008 unless they decide to make it permanent.

Now, we just have to wait to feel the effects outside of FHA from Fannie & Freddie Mac and then the investors like Wells Fargo, WaMu, Chase, Citi, etc.

Check back often as I'll be sure to post new developments as soon as possible!