Santa Clara County’s “Jumbo Conforming” Rate Soon To Be Lowered

News flash – in case you didn’t know, the current “jumbo conforming” loan rate in Santa Clara County of $729,750 is about to be repositioned (to speak euphemistically) to $625,500. This is all over October 1st, but many banks will stop lending at these rates long before that, perhaps prior to September 1st.

What does that mean to YOU, a San Jose or Silicon Valley home buyer, seller, investor or owner?

For many properties, there will be no change.  But if your property’s value is such that a 20% down purchase (a normal situation) has the loan between $625,500 and $729,750,there’s about to be a painful change.  How painful? About one half of one percent.

Right now a $700,000 loan is a jumbo conforming (good rate: 4.5%).  Under the new limits, it’s a jumbo (good rate: 5%).  The hike means, concretely, $210 per month for that $700,000 loan amount, or about $75,000 over the life of the loan.  That’s some serious dough.

This change probably WON’T impact homes priced lower than $625,000 or greater than $912,187.  But we may be seeing some pressure and price compression in the zone between.  It’s also likely that there will be some pressure to sell but also to buy before this change happens.

When money becomes more expensive, prices usually fall.  But this is an odd situation since not all price points are impacted.  For buyers with large down payments or who purchase their house “all cash”, it’s no difference to them – but it might be a huge difference to sellers.

My best guess: investors will make good use of this opportunity at a vulnerable point in the market.