February 27, 2021

New Mortgage Limit May Set Buyers Back

FOR most potential buyers, the impending change in mortgage limits is just another obscure wrinkle in federal policy. But for some New Yorkers, it could mean the difference between buying and not buying a new home.

On Oct. 1, when the limit on federally guaranteed loans drops to $625,500 from the current level of $729,750, hundreds of buyers in the city and nearby suburbs will either have to come up with larger down payments to stay under the new limit or face the prospect of applying for jumbo loans — anything above $625,500 — which have higher interest rates.

For some buyers, neither option will be viable, and they have set Sept. 30 contract deadlines in hopes of closing on their new homes before the change kicks in.

“Across the country this is not a big deal,” said David Maundrell, the president of aptsandlofts.com, “but in New York, because our prices are where they are, it’s going to be an issue.”

The lower limit will primarily affect buyers searching for homes that cost $750,000 to $1 million. In Manhattan, that means one-bedrooms and smaller two-bedrooms. In Brooklyn, it will mainly affect two-bedroom properties.

Jonathan J. Miller, the president of the appraisal firm Miller Samuel, estimated that the new limit would affect about 7 percent of transactions in Manhattan, which had about 10,000 sales in the past year.

“It’s not a catastrophic impact,” he said. “But it doesn’t help, in a market that’s already facing many challenges.”

June Phillips, a senior vice president of Halstead Property, said that throughout the summer “all my buyers who were looking for a place under $1 million had the jumbo limit in mind, because they knew they’d have to put more money down after Sept. 30.”

Since purchases in New York City, especially co-op purchases, can take as long as two months to close, it is already too late for buyers who are not already in contract to calculate their costs using the higher limit, she said.

In 2008, before the housing and mortgage markets imploded, the national limit for government-insured, or conforming, loans was $417,000. But afterward, to help keep markets moving, the limit was raised to $729,750 in areas with high median home prices, like California, New York and Washington D.C. “But considering the housing market still needs a push,” Mr. Maundrell said, “it’s bad timing to lower the limit now.”

For Peggy Leung and her husband, Bill Hanff, timing is so crucial that Ms. Leung has been contacting the developers of their nearly completed East Williamsburg building at least once a week to see how close it is to getting a certificate of occupancy.

The couple cannot close their deal, even though they have their financing lined up, until the building receives its final permits. “I check so much with them that I’m afraid they’re going to stop responding,” Ms. Leung said. “But if this doesn’t happen, we’re going to have to keep renting until I don’t know when.”

The two, who now rent an apartment in Gramercy Park with their 18-month-old son, Milo, are in contract to buy a one-bedroom duplex with a recreation room and a yard for $749,000. They qualified for a Federal Housing Administration loan, which allows them to put just 3.5 percent down and borrow $722,000. Their carefully drafted contract permits them to duck out of the deal and get their deposit back if the building does not receive its approvals by Sept. 30.

Their mortgage broker, Ross Weinstein, said he had encouraged them to write the deadline into their contract. Even though there remains a chance that the current limit may be extended, he said, it is not a high priority for Congress right now. And he doesn’t think Ms. Leung, who has her own interior design firm, and Mr. Hanff, a Web site designer, would qualify for a jumbo mortgage, which they would need under the lower limit. Most jumbo mortgages, also known as nonconforming mortgages, require at least 20 percent down and a credit score of 720 or more.

Mr. Weinstein, who is the managing partner of Exclusive Capital Consultants, said that given how long it can take to close a deal in New York City, Wells Fargo and other banks stopped operating under the $729,750 mortgage limit on Aug. 15. That means that anyone looking to borrow $700,000, for example, would already be given a jumbo mortgage rate, which is typically about half a point higher than the rate for a conforming mortgage and could cost borrowers an additional several hundred dollars a month.

Article source: http://feeds.nytimes.com/click.phdo?i=4a16f5a9df3c158b0b31050ce05ea257

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