As part of the Stimulus Bill that has passed the House, and will most likely get signed into law in the next few days, conforming loan limits for the next 12 months (most likely starting in February) will be raised up to $729,750! The new limits will be based on the area’s median home price, plus 25% or 50%. Since this language is yet to pass we can only speculate, but ‘people in the know’ seem to think that it will give us a max conforming limit of $625,000 for the DC Metro area, including real estate in Northern Virginia, Washington DC and Southern Maryland. The measure would also permit the Federal Housing Administration (FHA) to indefinitely insure loans up to that same level. Currently, FHA loans may not exceed $362,250.

The Bill helps us immensely with spurring buyers back in the market, and letting home owners in trouble refinance. As you’re probably aware, the current conforming Fannie Mae and Freddie Mac limit is capped at $417,000. Anything above that amount is considered a Jumbo loan and comes with a significantly higher interest rate. Northern Virginia and DC real estate has priced many first time home buyers out of the market in recent years. Once this new limit takes hold, buyers will be able to finance more expensive homes with a lower interest rate.

“In high-cost states, many home buyers with good credit could save $3,000 - $5,000 each year by not being forced into the current jumbo mortgage market”, said NAR president Richard Gaylord. “Currently, only families in lower cost areas are able to qualify for these types of affordable loans. Such a move would stimulate home sales and help stem the rise in foreclosures, reducing the number of foreclosure by as much as 210,000, and increase economic activity by $44 billion. What’s more, this will come at NO cost to taxpayers– it’s a policy change that could really boost the economy,” Gaylord says.

Other NAR projections show that raising the loan limit will reduce the supply of homes on the market by 1 - 1.5 months, and increase home prices by 2 to 3 percent. As many as 500,000 jumbo loans will refinance into lower interest rates according to the analysis.

If mortgage interest rates stay at the level they are now (or lower), the DC Metro area will have a VERY active Spring/Summer market!

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