Our friend Nick at the Wall Street Journal worked on this article for a couple of weeks about the loan limits going down in October, but no conclusive evidence yet as to what we can expect.
In San Diego County, loan limits will decline to $546,250 from the current ceiling of $697,500. Greg Demgen and his wife are trying to sell their 5,200 square-foot home for $900,000. While he says he’s confident the home is priced to sell quickly, finding buyers who can qualify for cut-rate loans “can only help the cause,” says Mr. Demgen, 51, of Vista, Calif. “We should get it done before that $697,500 ceiling goes away.”
One in 12 home sales during the past year fell within the county’s proposed and current limit, assuming a 10% down payment, according to MDA DataQuick, a real-estate research firm.
Some lenders say they will soon ease lending rules at the margins for jumbo loans. Banks sharply tightened standards three years ago on jumbo mortgages. Wells Fargo is preparing to reduce down payment standards to 20% from 25% in more markets and to relax the amount of liquid assets that borrowers must have after closing the loan, said Brad Blackwell, national sales manager for Wells Fargo Home Mortgage.
Mr. Demgen’s real-estate agent, Jim Klinge, says the decline in loan limits is overdue for loans backed by the FHA, which allows minimum down payments of 3.5%. Borrowers need to earn nearly $140,000 to qualify for the largest FHA loan in the county. “With that income, if you only have $25,000 for a down payment, then you shouldn’t be buying a house with virtually no skin in the game,” he says.
Still, the overall effect of the decline in the limit is hard to gauge. “The impact is going to very regional and how it all adds up is going to be hard to tell,” says Guy Cecala, publisher of Inside Mortgage Finance. “Dollar-wise and percentage-wise it’s not a big change, but that’s easy for me to say. I’m not living in San Diego looking for a new house.”