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Do You Know How Much You Can Borrow? Bay Area Loan Limits Much Lower In ‘09 Than ‘08

January 15th, 2009 categories: Buying, Loans / Financing

Amid all the hullaballoo surrounding the housing crisis and world economy these days, a major lending change went into effect Jan. 1 which, to date, has gotten rather little fanfare.

But for some Bay Area mortgage borrowers, the impact could be mean the difference between getting a loan or falling short of what’s needed to complete a purchase or refinance.

I’m talking about the new conforming and FHA loan limits, which, throughout Solano County, Contra Costa County and the rest of the Bay Area, have all been adjusted downward from what they were in December.

And if you were planning to borrow an amount near the maximum of last year’s mortgage loan limits, you may be in a for a huge shock, since those loan ceilings no longer exist. They’ve been replaced by lower loan limits, which vary by county.

Every year, Fannie Mae, Freddie Mac and the Dept. of Housing and Urban Development (HUD) use a formula to determine whether the maximum loan amounts will increase or stay the same. During the rapidly appreciating real estate market of the first half of this decade, conforming loan limits were raised on an annual basis, while FHA limits lagged far behind.

The national loan limit in 2008 was $417,000. But early last year, in one of the government’s first efforts to stimulate the housing market, the same bill that provided Stimulus Payments to qualified tax payers also racheted those limits upward.

In the nation’s highest cost areas, which included Contra Costa and many other Bay Area counties, the ceiling was $729,750 for a Fannie-/Freddie-sponsored Conforming Jumbo’ loan. In Solano County, the limit was boosted to $557,500 — which, while not as high as Contra Costa, Santa Clara, or San Francisco counties, was still $140,000 above the national minimum.

Anything over those limits required private money, which as 2008 progressed become virtually impossible or prohibitively expensive to come by.

The same was true with FHA loans, which in early 2008 had a ceiling throughout the Bay Area of $362,790. When the Stimulus Bill became law, the FHA limits were also increased to match the new temporary conforming limits (though, borrowers with higher loan amounts did face add-on costs).

In any event, when the new loan limits for 2009 were announced late last year, there wasn’t much publicity about it. Everyone was so consumed with watching the stock market and trying to figure out which large bank or investment house would be the next one to throw in the towel that all the other normal real estate  announcements just got a ‘yeah, so what’ kind of response from most people.

Nevertheless, as of Jan. 1, you can no longer get a conforming (Fannie/Freddie) loan at $729,750 in Contra Costa or any of the Bay Area’s other highest-cost counties. The new limit is $625,500. That same loan ceiling is in effect in Alameda, Marin, San Francisco and Santa Clara counties. In Napa and Sonoma, they’re $592,250 and $520,950, respectively.

In Solano meanwhile, the loan limits are back to what they were at the beginning of 2008 — the national  maximum of $417,000.

FHA loans limits, meanwhile, were also notched back. In many areas, the limits are exactly the same as the Fannie/Freddie loan limits. That’s true in every Bay Area county except Solano. Here, the 2009 FHA loan limit is $400,200 — $16,800 less than the county’s conforming loan limit.

I downloaded the data from the Fannie Mae and HUD web sites and created a spreadsheet which shows the new loan limits for every county in the state (the nine Bay Area counties appear at the top and Solano and Contra Costa (our market area) are highlighted in red, to make it easier to read). To view that report, click here.

If you’re interested in seeing what the new loan limits are for counties outside of California, you can view and download the data for every county in the U.S. on the HUD and Fannie Mae websites.

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This entry was posted on Thursday, January 15th, 2009 at 8:02 pm and is filed under Buying, Loans / Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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