Bigger Loans, Bigger Buyers!

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Prospective homeowners rejoice: conventional loan limits have been raised. Homeowners on the coasts should be especially excited, where the median price of homes often far exceeds the traditional $417,000 limit on loans.

If you were unaware, home buyers who needed loans for more than $417,000 would previously need to obtain a “jumbo” loan, with matching jumbo interest rates and monthly payments. This new law would now allow homeowners to take out bigger mortgages without knuckle-biting, arm-twisting interest payments each month. This should also stimulate the markets in high-end locations with home prices above this range.

Peter Miller of RealtyTimes.com has a different perspective on higher loan limits:
“To have jumbo mortgages–there must be investors who buy mortgage-backed securities. If securities buyers…don’t purchase mortgages with bigger loan limits, then it doesn’t matter what Washington wants. Without investors, super-jumbo loans simply won’t be available…regardless of what the rules say.”

Money doesn’t come from trees; it comes from big, wealthy foreign investors. If they aren’t willing to take on a high-risk mortgage, then Congress’s move won’t do much for the housing market. With two sides to every story, it will be a true test to see if the housing market is uplifted by this move, or if the popped housing bubble will remain stagnant.

What do you think?

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.