Fannie And Freddie Jumbo Mortgage Limits To Change October 1st 2011

Starting October 1st Fannie Mae and Freddie Mac will adjust the size of mortgages they will guarantee in high-cost areas around the nation. At that point the maximum loan amount that both Fannie and Freddie will drop from $729,750 to $625,500. As a result this move may make mortgages more expensive and/or harder to secure for some buyers.

Furthermore, other mortgage lenders may be motivated to make similar changes because of reduced government-backed loan assistance.

Stan Humphries, Chief Economist at Zillow said, “For people planning on exiting the market altogether, that is a compelling proposition. Home sellers may have to be patient to get the price they want. The curbs on government-backed loans could, at the margin, reduce the available pool of buyers.”

This change will mean that anybody who wants a government-backed mortgage for a $1-million home may have to come up with a $370,000 down payment instead of $270,000 after October 1st.

Real estate markets where $1 million buys a nice house, but not a mansion has been picking up. The National Association of Realtors has reported that sales of homes over $1 million were up over 5 percent in March over the same month in 2010 and with this change from Fannie and Freddie there could be an acceleration of activity in this market.

  • The good news is that there is a chance that private mortgage lenders may step in and fill the gap when Fannie and Freddie’s changes go into effect.


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