One of the loan officers I routinely refer to my clients, Alan Gross of National City Mortgage, sent me the following update on the mortgage environment.

Earlier this year the loan limits for conforming  and FHA loans were raised up to a maximum $729,750 in high cost areas by The Economic Stimulus Act of 2008. (Ken’s note: The MD Suburbs of DC is such a high cost area.) These higher loan limits disappear on December 31, 2008.

What may not be understood is that the Jumbo Conforming Loans are almost gone now. Because of delivery requirements for the Jumbo Conforming Loans, most lenders are requiring that the loans be funded before December 15, 2008. Some are cutting off locks as early as mid November. Buyers who are considering purchasing a home with the new temporary higher limits and plan to close at the end of December may find themselves out in the cold.

Although new maximum loan limits up to $625,500 have been announced the newly calculated area median sales price index hasn’t been announced yet. The area median sales prices index is recalculated based on the housing price data from October 2007 - October 2008. This data is expected to be released in November 2008. Until the data is released the Jumbo Conforming Loan program will be in a short hibernation mode.

FHA loans will be able to close using the current maximum loan loan amount of $729,750 through December 31, 2008. The new FHA loan limit will also be $625,500 starting January 1, 2009. The maximum loan limits for various areas will also be set when the newly calculated median sales price information is released. The maximum loan amount will be 115% of the median sales price.

Stay tuned for further updates as they are released.