As the New Year gets underway, a number of new laws are in effect, including things like bans on texting while driving.
With regard to mortgage, loan limits have also changed, which could mean big, bad surprises for those looking to refinance or purchase a new home in more expensive areas of the country.
As of January 1, the so-called high-cost conforming loan limit fell roughly 14 percent from $729,750 to $625,500, pushing that many more borrowers into jumbo loans.
And with jumbo loans pricing an average of 1.83 percent higher than their conforming loan brethren, it could spell trouble for many looking for a little interest-rate relief.
While mortgage rates on conforming mortgages, those up to a loan amount of $417,000, have fallen precipitously over the past few months thanks to government intervention, jumbo loans haven’t seen similar improvement.
In fact, the spread between jumbos and conforming loans is up from 1.37 percent a week ago and 0.23 percent a year earlier.
Looking at a simple example over at Wells Fargo, their advertised conforming 30-year fixed-rate mortgage is pricing at 5.25 percent, while their 30-year jumbo is pricing at 8.125 percent.
The difference is enough to keep would-be homebuyers out of the market until financing improves for jumbo loans, while those looking to refinance could be out of luck as well if their loan exceeds the new limits.
Of course, the new limits are generally only an issue in places like California and Florida where home prices greatly exceed those in other parts of the country.
But with these states accounting for much of the foreclosure inventory, lower loan limits may be a major roadblock to a speedy recovery, that is, if anyone actually wants to stay in their home.