Finally! The long awaited loan limits from the Federal Housing Administration has arrived! The new FHA limit for the Northern Virginia and Washington DC Metro area is now $729,750. This is HUGE! With the credit markets continuing to tighten and second mortgage lenders scaling back, we will now have a vehicle for those borrower’s who don’t have 10%-15%-20% down…plus the rates are better than conventional mortgages!

My eyes opened even wider last night when we learned that the new Fannie Mae/Freddie Mac ‘jumbo-conforming’ for the DC Metro real estate region was going to mirror the new FHA limit. You got it, the new temporary Fannie/Freddie second tier loan limit in the DC region is now $729,750! This number was completely out of left field, and against everything we had heard from our contacts at Fannie Mae…but who are we to argue!? Here are the guidelines that you need to know:

·Financing for owner occupied, second home and investment properties available

· Minimum down payment requirement (owner occupied) for the new “jumbo conforming” is going to be 15% (note: the guidelines state 10%, but since we are in a “declining market area” our max financing is cut by 5%)

· Credit score requirement is 700 for over 80% LTV and 660 for under 80% LTV

· Max seller concessions is 3%

Rates will be slightly higher than conforming under this new jumbo-conforming limit, but lower than current jumbo. Only three loan types will be available, 30 year fixed, 15 year fixed, and 5/1 ARM…they will be available on:

30 Year Fixed (avail 4/1/08)

5 Year Fixed (avail 4/1/08)

5/1 ARM (avail 5/1/08)

As this information is released to the public I certainly think that this will generate some excitement. If rates cooperate, thousands of buyers could really take advantage of these new offerings. While useful for some borrowers, the higher conforming limits pale in comparison to how FHA is currently structured. As it sits currently (which is subject to change), FHA is going to be far more beneficial for us than Fanniem Mae/Freddie Mac…here’s why:

1. Even with a loan amount of $729,750, borrowers still only need a minimum of a 3% down payment (FHA does not have a ‘declining market policy’)

2. Mortgage insurance payments are lower with FHA (because of the credit crisis second mortgages are become nearly extinct at higher loan-to-values)

3. Rates are significantly more attractive with FHA

4. No credit score requirement

All in all, this is all very promising, although rates have continued to go up this week, I am still very confident that the movement higher is temporary. Should you have ANY questions about these changes for the Northern Virginia or DC Metro real estate areas, I’m more than happy to answer them. I’ll post any new guideline changes that may come about, but as you may recall the current FHA guideline only requires a 3% down payment, but in many cases with a Nehemiah-type program, the down payment can come from the seller. You can look up the new FHA loan amounts in other regions of the country here.

Todd Murdock | Senior Mortgage Advisor | HomeFirst Mortgage Corp | 703.549.3400

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