In a move that will transform the local housing market, the government set new guidelines yesterday for the loans that will be backed by quasi-federal agencies Fannie Mae and Freddie Mac. In Los Angeles County, loans up to $729,750 will be conforming loans (up from $417,000, the former nationwide standard), with low downpayment requirements (as low as 3 - 5% for FHA loans, targeted towards low- and middle-income buyers.) Currently, 30-yr fixed jumbo loans have rates more than 1.5% higher and with higher downpayment requirements than conforming loans. When the new underwriting guidelines are determined by lenders, the purchasing power of buyers in the $400,000 - $800,000 range will be increased by nearly 10%. This incentive will also enable buyers to purchase a home who don't have the current required 20% downpayment ($140,000 for a $700,000 home) but may otherwise qualify on an income basis. The increase in loan limits is temporary and is intended to expire at the end of 2008.
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