Mortgages for the Washington area’s priciest homes are about to get more expensive.
This fall, the government is scheduled to stop backing loans of more than $625,500, making them subject to higher interest rates and down payments. The change could drag down home prices, especially in upscale neighborhoods, and deliver yet another blow to the faltering housing market.
Real estate trends over the past 10 years in the D.C. metropolitan area.
Calculator
The loan limit — down from $729,750 — would have affected about 40 percent of mortgages made in Great Falls if it were in place last year and more than 20 percent of the loans made in expensive areas such as Bethesda, McLean, Chevy Chase, Dunn Loring, Potomac, Fairfax Station and Upper Northwest Washington, according to a Washington Post analysis of data from LPS Applied Analytics.
Unless Congress acts soon, the change will kick in Oct. 1. But the effects will be felt before then. Borrowers who want to beat the deadline should apply by mid-July because it can take months to process mortgages these days, industry experts said.
When it comes to large loans, “the time for the dirt-cheap mortgage may be running out,” said Keith Gumbinger, a vice president at mortgage research firm HSH Associates.
If the loan limit is lowered, buyers trying to get into the pricey neighborhoods may be forced to stay put or scale back their aspirations. Owners of more expensive homes would have a harder time selling. And refinancing may no longer make sense for some homeowners, analysts said.
Heather King and her husband, Rick Yost, learned of the deadline this month. They are rushing to put their Dupont Circle condominium on the market next month instead of September. They recently had a baby, and they want a larger home in the suburbs. But they need to sell before they can buy.
If they took out a $729,750 mortgage and put down 10 percent, they could afford the $810,000 house they’ve been eyeing in Alexandria, said Brian Martucci, their mortgage broker. But come October, a mortgage of that size cannot be guaranteed by the federal government, thrusting it into the “jumbo mortgage” category. Jumbos generally require at least 20 percent down — or, in this couple’s case, $162,000 — and their rates can be about half a percentage point higher.
Even with more money down, they would still have to pay a higher interest rate and set aside enough cash to cover six months of payments, instead of two, Martucci said. “They’d have to settle for a less expensive home,” he said.
King figures that anyone looking to buy their high-end condo could face similar constraints. “We think we could be hit on both sides as sellers and buyers,” she said.
The current loan limits were put in place temporarily in 2008, when rattled investors stopped buying jumbo mortgages. Instead, they turned to loans that were guaranteed by Fannie Mae, Freddie Mac or the Federal Housing Administration so the government would cover their losses. At the time, Fannie and Freddie did not buy loans that exceeded $417,000, and the FHA capped its loans at $362,790. Rates on loans larger than that, or jumbos, shot up.
The Post Most: BusinessMost-viewed stories, videos and galleries int he past two hours
World Markets from
Other Market Data from
Key Rates from
Loading...
Comments