Mortgage limit change could negatively impact New York buyers

August 26, 2011 04:34PM

An upcoming change in mortgage limits could disproportionately affect
buyers in New York City because prices are higher than in the
rest of the country, the New York Times reported. On Oct. 1, the limit
on federally guaranteed loans drops to $625,500 from the current level
of $729,750, meaning that buyers in the city and surrounding suburbs
will have to come up with larger down payments or have to apply for
so-called jumbo loans above $625,000 at higher interest rates.

Because for many buyers neither option may be possible, they are
setting Sept. 30 deadlines to close deals before the change. According
to the New York Times, the lower limit will primarily affect buyers of
homes that cost $750,000 to $1 million. In Manhattan, that could mean
one-bedrooms and smaller two-bedrooms. In Brooklyn, it would mainly
mean two-bedroom properties. Altogether about 7 percent of
transactions in Manhattan, which had about 10,000 sales last year,
could be affected, said Jonathan Miller, the president of appraisal firm Miller Samuel.

One couple has been contacting the
developers of a nearly completed East Williamsburg building at least
once week to see if it has a certificate of occupancy. The couple
cannot close the deal, even though they already have their financing
lined up, until the building receives its final permits, according to the Times. “But if this
doesn’t happen, we’re going to have to keep renting until I don’t know
when,” one of the potential buyers, Peggy Leungs said. They have carefully drafted a contract that
permits them to get out of the deal and get their deposit back if the
building does not receive its approvals by Sept. 30.

David Maundrell,
president of aptsandlofts.com, said that given the challenges of the
housing market, now is a bad time to lower the limit. [NYT]