Posted: Sep 21, 2011 6:38 PM by Ariel Wesler
Updated: Sep 22, 2011 8:15 AM
Starting October 1, you won't get as much money from the federal government to buy a house.
In San Luis Obispo County, the federal housing loan limits will drop 18 percent. In Santa Barbara County, loan limits will fall 14 percent. Congress voted to temporarily raise the loan limits in 2008 to stimulate the economy and has continued delaying the expiration date until now.
With interest rates at all time low, Realtors say now is the time to buy, but some feel congress is about to making things more difficult for buyers and sellers.
"I just don't feel the recovery is strong enough yet to be able to withstand this kind of a setback," said Nancy Puder, a longtime Realtor in Arroyo Grande.
Starting October 1, you won't be able to get a loan from the Federal Housing Authority for more than $625,500 in Santa Barbara County or $561,200 in San Luis Obispo County. Puder says the majority of the loans for her listings are from the FHA.
"We're talking about people who own homes that are $500,000-700,000. That is pretty common around here. Those sellers are going to have more difficulty selling their homes," Puder said.
She says buyers will not be able to finance their homes at an affordable rate, leaving sellers stuck with their properties and forced to lower prices even further.
"FHA, you can get in with as little as three and a half percent down, whereas a conventional you're looking at 10 or 20 percent down," Puder said.
That could mean as much as $100,000 down on a $500,000 home.
"I had to lay everybody off," said Bob Newdoll, a local builder.
It's not just consumers who could feel the pinch. Builders could also take a bigger beating.
"If we can't sell the homes, then we can't build the homes, and then if that's the case, well then, the sub-contractors that I have working for me would be out of work," Newdoll said. "We need all the tools we can possibly get."
The new limits apply to loans backed by the FHA, Fannie Mae, and Freddie Mac. The California Association of Realtors says more than 30,000 California families will be affected.
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