Freddie, Fannie Loan Limits Could Complicate Big Buys

By Alan Zibel
Associated Press
Saturday, November 8, 2008

People looking to buy more expensive homes next year will have fewer options for financing because Fannie Mae and Freddie Mac will have lower limits on the size of loans they can buy.

The changes, effective Jan. 1, will lower the limit in high-priced real estate markets to $625,500 from $729,950. People who need to take out home loans above that amount typically pay higher interest rates, which can price some buyers out of the market.

Loan limits vary by metro area and are based on the local median house price. The limit in the Washington area will be $625,500.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, kept the limit for lower-cost metro areas at $417,000.

Lawmakers temporarily raised the loan limits for Fannie and Freddie in an economic stimulus bill passed in February and revised them in a housing bill passed over the summer.

There are fears that the reduced limits will hurt the housing market next year. Fannie and Freddie have become the dominant source of mortgage funding since last year's collapse of the subprime lending market.

The National Association of Realtors is pressing lawmakers to keep the limit at $729,950 to help the U.S. housing market recover from its worst slump in decades.

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