OUCH! New Loan Constraints Hit San Diego
Beginning on Jan. 1, 2014, loan limits for Federal Housing Administration-insured loans in high-cost areas throughout Southern California will be reduced by $100,000 – $150,000, greatly decreasing the buying power of borrowers looking for a conforming loan. While it was expected that the U.S. Department of Housing and Urban Development (HUD) would announce that the temporary loan limits established as part of the Housing and Economic Recovery Act of 2008 would expire in 2014, many people feel the magnitude of the loan limit reductions was surprising.
On average, most counties in the nation will be subjected to a $65,000 reduction in FHA Loan Limits in 2014. With higher-cost real estate, Southern California counties are going to experience a much more substantial decline.
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Southern California County Loan Limits SAN DIEGO: $546,250 (more than a $150,000 drop from the 2013 loan limit of $697,500).
Why are Conforming Loan Limits being reduced? Since 2008, FHA has based its median home prices on the highest median home price for a county over time, which for many counties has meant 2007 home prices, when prices were at a peak. If an area’s median home price has increased since 2008, FHA will use the higher median price. However, home prices in many areas are still below 2007 levels, which has resulted in the drastic reduction of FHA’s numbers.
Find out what's happening in Carlsbadwith free, real-time updates from Patch.
Options for Purchasing a High-Value Home - Home prices in San Diego have jumped up over the past two years and are expected to continue to increase (though not as dramatically as we have recently seen). With FHA loans now capped at $546,250, buyers interested in financing a high-cost home will have to consider the following:
Purchasing a less expensive home
Increasing the Down Payment
Using Gift Funds to cover costs
Qualifying for a Jumbo Loan
Jumbo loans are typically either backed by individual investors or a financial institution that funds and purchases the loan, and therefore follow a different set of funding guidelines. While the income evaluation process is generally very similar to conventional loans, jumbo loans do require greater amounts of income to be shown on tax returns, bank statements and other documents. The current rate on jumbo loans is essentially the same rate as 30-year conventional loans, but the down payment requirement and debt to income ratios are stricter. It’s important to remember that not all Jumbo Mortgages are created equally.
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If you are thinking about Buying or Selling a home in the near future, it would be worth your time to request a Free Consultation with a Realtor with extensive Financial Expertise. We would be happy to help you develop a balanced Life Plan/Real Estate strategy that can be used to obtain real numbers about the impact this change will have on you. It’s never too soon to develop a plan for what could easily be the Most Important Financial Decision of your life! www.RicksSanDiegoHomes.com 760-644-8426
