WILL THE LOWERING OF CONFORMING LOAN LIMITS FOR HIGH COST AREAS LIKE HOBOKEN EFFECT YOU IF YOU’RE LOOKING TO BUY?

The Federal Housing Finance Agency (FHFA) announced revisions to their conforming loan limits for 2009.  The new limit for 2009 will remain at $417,000 in most areas of the US, however loan limits for higher cost areas including Hoboken have been lowered to $625,500 from $729,750.  Many areas in New Jersey do not reach this lower cap and are reduced significantly from 2008.

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in New Jersey.

Even though the lowering of the cap means that the total number of that are eligible for conforming financing will increase, some market experts are disappointed that the $729,750 limit set forth in the Economic Stimulus Act of 2008 was not made permanent.  Some experts are predicting that the limit cap reduction will negatively impact both the interest rates and the availability of funds for jumbo mortgages.

If you are looking to purchase a premium property in Hoboken or Downtown Jersey City and know that you will be financing an amount somewhere in-between $625,500 and $729,750, it may be a good time to make an offer and receive a mortgage commitment from your lender before the 1/1/2009 lower limits go into effect.

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