Searching for a home in a high-cost city? Starting today, financing for that not-so-humble abode may be more expensive. As CNN reports, Fannie Mae and Freddie Mac are lowering the caps at which they’ll back mortgages in pricier regions. The ceilings will vary depending on the market, CNN says. According to Reuters, mortgage limits in Los Angeles, Washington D.C. and the New York City metropolitan area will be set at $625,500. That means those who may have earlier relied on Fannie and Freddie-backed loans now have to turn to more costly private lenders for loans that exceed the limit—also known as “jumbo” loans.
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Before 2008, government-backed mortgages were capped at $417,000. That changed when President Bush signed the Housing and Economic Recovery Act and temporarily increased the maximum limit to $729,750 in areas with the most expensive housing. As Credit.com’s Christopher Maag reported in August, a group of senators introduced legislation seeking to extend that limit through 2013, but that bill was never passed.
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Though the new changes will affect only about two to three percent of the housing market, Reuters says, some in the housing industry wonder why anything that might reduce buying power is being done at all, given the market’s tenuous state. “Nobody wants to see anything that would cause even a single buyer to change his or her mind,” Keith Gumbinger, of mortgage information provider HSH Associates, tells CNN.
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