Increased Federal Loan Limits – What do they mean to you?

As part of the the new Economic Stimulus package, limits on the size of FHA Insured loans to $729,000 and also increasing the limit of “conforming” loans to the same amount. What does all that mean and how can it help you buy a home?

First of all, keep in mind that the increases are on the books only through the end of 2008. This can, of course, be extended and I have seen some speculation that whoever ultimately wins the Presidential election would be very reluctant to make his (or her) first official act the elimination of this stimulus. But -right now – the increases are for right now.

There are some geographic limitation as to where these increases may be utilized. You should speak with your lender to learn the specifics.

Secondly, you also have to remain cognizant of the fact, that even with increased limits, lenders are tightening their requirements for qualifying for ANY loan right now. While this may make it tougher for some folks to get loans, this is a good thing.

Lenders have finally come to grips with the fact that giving loans to people who are going to have difficulty making payments is not good for anyone. The days are over where banks will give out loans to people simply because they breath oxygen and ask for money.

As a Realtor, I am obviously a proponent of people buying houses. I also, strongly believe that you should not buy more house than you can afford. Mortgages are wonderful things – they give you the chance to purchase a home and pay for it over time – otherwise, most people would not be ablt to buy homes. Buying within your means is a critical piece that has, for many years, become secondary to the wants and desires of consumers who want bigger, fancier houses than their incomes will support.

So explore the new loan limits with your lender and make an informed, joint decision on what the right size mortgage is for you.