Joe Wilson's Silicon Valley Real Estate Blog

Most Buyers are aware that Congress temporarily raised the loan limits for "conforming loans" from $417,000 to $729,750 in high cost areas like the Silicon Valley. Many had hoped that the temporary limits would be made permanent to stimulate the recovery of the housing market but in the housing bill signed into law in July, the permanent limits were set to only $625,550 for high priced areas. While much better than the old $417,000 limit, the reduction, set to go into effect on Jan 1, 2009 means that many Buyers will have three choices: 1) Look for homes at lower prices, 2) come up with a larger down payment or 3) get a non-conforming "jumbo" loan at a much higher rate. This third option is worse than it seems since 30 year fixed rate jumbo mortgages have been eliminated and replaced with jumbo "hybrid" loans with a short fixed period (e.g. 3 or 5 years) before reverting to adjustable.

So, if you're a potential Buyer and will need a loan above $625,550, you've only got about three months left. With 30 year fixed conforming and jumbo conforming rates now as low as 5.75%, this is a great time to buy your home.