Admittedly many of the homes that sell in Carmel, Pebble Beach, Carmel Valley and over the hill in Monterey and Pacific Grove are priced such that most buyers need a “jumbo” or “non-conforming” loan. “Jumbo” loans are the loan product that has been most changed by the current credit crunch. The cost of these higher principal loans is much higher and the hurdles that have to be overcome to be approved can be extremely tight.
Lenders used to make these loans to a home buyer and a short time later sell them to investors on the secondary market. The collapse in demand for these loans (turned into securities) has made lenders much less enthusiastic about lending.
“Conforming loans” on the other hand conform to government guidelines (set by the Office of Federal Housing Enterprise Oversight (OFHEO)) and can therefore be purchased by Fannie Mae and Freddie Mac, the two Government Sponsored Enterprises that are charged with facilitating the flow of credit. Fannie and Freddie are continuously in the market for conforming loans.
The Relevance To The Monterey Peninsula?
In 2008 the loan limits were raised to $729,750 for Monterey County. This allowed buyers to use conforming (less costly) loans to purchase higher priced homes. In January the loan limit for Monterey County reset to $483,000 while “high priced counties” reset to $625,500. Monterey was lower because of the high number of transactions in the Salinas Valley that pulled the median sale price for the year down.
Any increase in the conforming loan limits will be welcome news to buyers looking at $500,000 or more listings.
The First-Time Buyer Credit
The bill also moves the first-time buyer credit up to $8,000 (from $7,500) and more importantly removes the requirement that it be paid back as long as the buyer stays in the home for at least three years. The credit is available for first time home buyers that purchase a home before the end of 2009.
