Real Estate Articles

Home : Publications : Real Estate Articles

REALTOR®: Conforming Loan Limits Remain Unchanged

Realtors will continue to seek higher conforming loan limits

Monday, December 3, 2007

The Office of Federal Housing Enterprise Oversight (OFHEO) recently announced conforming loan limits for 2008 will remain at 2007 levels. The maximum 2008 conforming loan limit for single-family mortgages will remain at $417,000, the same as in 2006.

The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.

The cost of financing a home remains out of reach for many households in California because of the low loan limit. For properties in the “high cost areas” of Alaska, Hawaii, Guam and the U.S. Virgin Islands, the loan limits are 50 percent higher.

“At more than $568,000, the median price of a home in California is more than 2.5 times the U.S. median of $221,000, yet California is not recognized by OFHEO as a ‘high-cost’ state,” said California Association of REALTORS® (C.A.R.) President William E. Brown. “California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam and the U.S. Virgin Islands are recognized by OFHEO as ‘high-cost’ areas.”

“With a 20 percent down payment, the highest-priced home one can buy with a conforming loan in California is $521,250, $44,750 below the third quarter median price of $568,130,” he said. “Fifty-five percent of all home sales in California exceeded the $521,250 threshold in the third quarter. With a 10 percent down payment, even fewer buyers can qualify for a conforming loan.”

San Mateo County Association of REALTORS® (SAMCAR) President Geoffrey Craighead said he is disappointed conforming loan limits will remain the same in 2008. “A conforming loan complies with Fannie Mae or Freddie Mac guidelines and means that the loans can be backed by that semi-governmental agency, making it very easy to sell on the secondary market. Today, Wells Fargo has priced a conforming loan at 5.5 percent. Since non-conforming loans are not be backed by Fannie or Freddie, the risk is greater and therefore the interest rate will be higher. Today, Wells Fargo prices its 30-year fixed non-conforming loans at 6.75 percent.”

How does this affect home buyers in San Mateo County?

“With 20 percent down, you can buy a $525,000 property and finance it with a conforming loan and your principal, interest, taxes and insurance (PITI) will be $3,037. That same scenario with a non-conforming loan would be a PITI of $3,378 - more than 10 percent higher,” explained Craighead. “The higher prices in San Mateo County means you need more money down and/or a higher income to purchase the home which reduces the affordability of homes in the area.”

Craighead, a longtime broker and owner of Craighead Associates in San Carlos, said raising the conforming loan limit is important in San Mateo County. “SAMCAR continues to work with C.A.R. to urge our elected officials in Washington to act on increasing all federal loan limits for California.”

Brown said, “This critical legislation is a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder.”

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

» Back to Real Estate Articles