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 Last February, conforming loan limits were TEMPORARILY increased from $417,000 to $729,750 for single family homes in high cost housing areas. Effective January 1^st the limit will drop to $625,500.

 A campaign by mortgage and real estate industries for legislation to extend the limit got put on the back burner by legislators due to the need to address the credit crisis.

 And, let’s face it; the legislative attitude towards the mortgage industry in the present and in the foreseeable future is not friendly. It is not politically prudent to do anything that could be perceived as helping any of us who may still be in that business.  Of course extending the limit would be good for the mortgage business. But what many politicians seem to miss is the fact that extending the limit will also benefit consumers in high cost housing areas.

 Elected national representatives with constituents in lower cost areas may not care much about legislation to help those in high cost areas. And there are more of them.  So don’t look for legislative help. The temporary limit will expire at the end of 2008.

 We spoke of a certain sense of urgency in our August 4^th Bulletin because of the December 2008 expiration.  Obviously nearly three months have passed, making it more urgent now.  But also, several lenders are giving notice that these loans must be funded before December 1^st. Even though legislation allows them to fund loans with temporary limits through the whole month, lenders are not required to make them available that long.

 So buyers and borrowers have less than two months to take advantage of the higher limits. That’s not much time. Buyers and sellers in the $750,000 to $800,000 price range; take note.

 If that’s all you need to know, you can skip the figures that follow. If you need numbers for a specific transaction, call your loan consultant.

 Buyers with limited down payments are best served by FHA loans requiring only 3% down payment. Until next January (and maybe this December) a buyer can purchase a home for $752,320 with $22,750 down and a 97% FHA loan of $729,750 (present loan limit). 

 But when the limit changes, buyers with 3% down will feel some hurt. With the new $625,500 loan limit, the maximum purchase price for a 97% loan will be $644,840.  So a buyer with roughly $20,000 for down payment can buy a home in the $640,000 price range.

 That’s a $112,000 hit in price range. The difference in quality and available inventory between $650,000 and $752,000 is huge.

 Conforming loans typically go to 90% of purchase price, so we’re talking about 10% down. So, when the limit expires 90% financing will be available to a purchase price of $695,000.

 Buyers in the price range from $750,000 to $800,000 - you should evaluate thoroughly the risks of waiting.  You should know that the conforming loan limit is expiring sooner than you might think. And rates for loans above conforming are not only significantly higher, they are much harder to get at any rate.

 Call your loan consultant for specifics. Take advantage of the temporary limit if you can.

George Remsberg has been a friend of mine and business colleague in mortgage lending for more than 10 years.  He has written this for me and will be featured in more productions coming up.  If you are in the mortgage business, by visiting his website listed below, you can get an automated version of his “Mortgage Momo’s” which comes our weekly formatted with your name and company logo and information - Thanks George!

©2008MortgageMemos.com

INVENTORY CHANGE - SILICON VALLEY

FOR THE FOURTH QUARTER OF 2008

(AREAS 1 through 23, that is: Gilroy through Sunnyvale)

Class 1 Properties (single family homes):

Overall Change from 9/27/08 to 10/18/08:

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Class 2 Properties (condominiums or townhomes):

Overall Change from 9/27/08 to 10/18/08

Yes there is still money available! - If you are qualified, can afford the payment, are willing to buy or refinance property at current reduced values, and have good reserves after the transaction is complete, there is a loan for you, and it’s not tough to get.  Here’s some advice:

1. Many lenders have closed their doors & stopped doing business.  You do not want to have your transaction placed with one of them just before they go out.
2. Several national mortgage lenders have gotten proprietary.  This means you could only get financing with that firm directly, they no longer work with or accept loans from Mortgage Brokers.  An example of this is Bank of America.
3. Mortgage Bankers, which are a class of lender between brokers and direct lenders fund their loans through pre-arranged credit lines then within 30 days sell them.  These credit lines have been negatively impacted by the stalled credit markets causing these lenders in a few cases to renege on loan approvals.  This can cause real disruption in the lives of everyone in the transaction.
4. There is still an over-abundance of lending sources and their conversations are ever more creative to survive so choose your hiring standards carefully & stick to them.  May I suggest professionalism, experience of more than 10 years, and someone who will listen to what you care about?
5. Now more than ever, if you have trusted advisers in your life stay close, let them know how much you appreciate their advice, and absolutely follow it without question.  After all, in their area of expertise, they know more than you do - sort-of a flashlight on a dark road!

Yes there are still buyers who want to and are buying - I recently heard though unverified that 91% of the 1,800 pending sale transactions in Santa Clara County involve bank owned or seller distressed property - WOW!

If you’re afraid, frozen, or even paralyzed about your current finances, the real estate market, or general economic situation, I have a solution - contact me!

Finally, in my years in business I can recall many conversations with clients who said “boy if property values would just come down a little and there weren’t so many trying to buy, I’d buy several”.  Now is you chance, and there are some great homes available at fire sale prices where you would love to live.

According to an ancient story there was a king who was continuously torn between happiness and despondency.  The slightest incident would cause him great pain and upset and turn his happiness into disappointment and despair.  The king finally got tired of his situation and began to look for a way out.  He sent for a wise man in his kingdom who was reputed to be enlightened.

When the wise man came, the king said to him “I want to be like you.  Can you give me something that will bring balance, serenity, and wisdom into my life?  I will pay any price you ask.”

The wise man said “I may be able to help you but the price is so great that your entire kingdom would not be sufficient payment for it.  Therefore, it will be a gift to you if you will honor it.”  The king gave his assurance and the wise man left.

A few weeks later the wise man returned and handed the king an ornate box carved in Jade.  The king opened the box and found a simple gold ring inside.  On the ring there was an inscription that read This Too Will Pass. “What is the meaning of this?” asked the king.  The wise man said, “wear this ring always.  Whatever happens, before you call it good or bad, touch the ring and read the inscription.  That way you will always be at peace.

In these times where every direction we turn reveals an abundance of bad news and sadness, you and I must remain centered on our dreams and the possibility that the future holds for all of us, and it certainly does.  This will cause the direction and results we seek.  To continuously engage with bad news of course will replicate that in your life as well.  Guard carefully the thoughts you think.

May I recommend you read this and more in A New Earth - Awakening to Your Life’s Purpose by Eckhart Tolle.  Life happens in cycles and as intense as this one is, the upside which is on its way will certainly be quite AMAZING!

It is common these days to have long protracted conversations with real estae clients.  It’s also common that many clients have expectations from previous experiences that do not serve them now.

Jane did not communicate with me when she promised (http://www.satorialliance.com/ive-had-it-up-to-here-does-quality-matter/ ).  I sent an E-mail reminder, no reply.  I sent another 3 days beyond her action deadline, “Been real busy, will get back to you in a couple of days”.  Three days later, no reply.  I make a reminder phone call & leave a voice mail, no reply.  I send another  reminder e/m 2 days later, Reply: “I’m going to talk with a broker as well to be assured I get the best rates in Silicon Valley”.

So, for now this two week process of taking care of Jane hangs in the balance of who will say they have the best rate for Jane.  Delivering on that promise is another topic.  While Jane has been shopping for her mortgage like she does with so many other commodoties, mortgage interest rates have increased nearly .5%, something she could have avoided saving herself $166./month which she will now have to pay unless further increases occur before she makes her choice.

Times are different, the lending process is different, and in Jane’s case 4 major lenders supply all the mortgage product to all bankers and brokers who affer it at essentially the same price.  Expectations from a different real estate and financing market will cost you if they are no longer effective.

You will only know that if you get QUALITY ADVICE!