The House Appropriations Committee approved a bill that would extend the temporary conforming loan limits in high-cost housing markets through the end of September 2010. In February of this year, as part of the American Recovery and Reinvestment Act, the maximum amount for conforming loan limits for mortgages originated in 2009 were extended through the end of this year. This new bill would extend those limits longer, through September 2010.
A conforming loan is one that meets the standards of loan guidelines as established by government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae. Presently, the conforming loan limit in certain high-cost areas of the U.S. have a cap of up to $729,750, depending on location. The cap is 125% of the area median home price and is not to exceed $729,750, except in Alaska, Hawaii, Guam and the U.S. Virgin Islands, where the cap is 50 percent higher than the limits for the rest of the country. To determine the limit in your area, see local area loan limits.
Increasing the conforming loan limits help make larger loans more affordable and easier to obtain. With lower limits, more loans would be classified as larger “jumbo loans,” which require banks and credit unions to hold the loans on their books. As a result, jumbo loans usually have higher interest rates, sometimes up to a three-quarters of a percentage point, as seen earlier this year from quotes provided in Zillow Mortgage Marketplace.
