Categorized | Finance and Mortgage

Luxury Home Markets Could Struggle with Upcoming Loan Changes

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With Fannie Mae and Freddie Mac set to reduce the size of loans that they purchase from lenders, many potential homebuyers have be stuck having to take out the pricier jumbo loans. Currently the limits as to what Freddie Mac and Fannie Mae will purchase are set at seven hundred twenty-nine thousand, seven hundred and fifty dollars. However, that number will drop in the beginning of October to just over six hundred thousand.

Such a drop in limit will cause those looking to buy more expensive homes to pay a higher interest rate, and will require a minimum twenty percent down payment for approval. Because the deadline is approaching, many of the major banks have stopped taking loan applications for loans greater than the upcoming new limit so as to avoid any difficult situations that could be caused by delays. Other lenders have been working around the clock to finish pending deals that could fall through if not completed before the October 1st deadline.

The change in limits won’t affect the majority of homes in the United States, though it will have an impact on at least two percent nationwide. New York City is one of cities that will be most adversely affected by the changes, as starter homes in the city can cost over eight hundred thousand dollars.

One of the biggest challenges expected with the change in limits is going to be the need for a larger down payment on the homes. Many feel that a twenty percent down payment will heavily restrict who will be able to buy luxury homes, or even starter homes that are priced above the new limits

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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