The limit on mortgages backed by the federal government will be $625,500. Loans above that amount will be less available and more expensive. Previously, a mortgage of up to $729,750 was a conforming loan. With the change, however, any mortgage above the new limit will be a jumbo, and as such ineligible for government backing. As a result, those buyers will have to pay a higher interest rate or make a bigger down payment. Lenders consider jumbo loans risky because they must hold them on their books if they fail to sell them to private investors. As a result, interest rates on jumbos are typically from one-quarter to three-quarters of a percentage point higher than those for conforming loans. During the recession the federal government actually raised the conforming loan limit in New York to $729,750, specifically to spur sales in a city where prices far exceed national averages. Each November, Fannie Mae and Freddie Mac release their conforming loan limits for the upcoming year. The 2013 conforming loan limits are expected to remain unchanged at $417,000, with high-balance conforming loans available for up to $625,500.
There may be exceptions made for homeowners whose mortgages are currently between $625,500 and the former jumbo-conforming loan limit of $729,750, and whom are seeking rate-and-term refinances via HARP 2, but that announcement has not been made.
The FHA and VA have committed to keeping their existing loan limits in place through 2013. In high-cost areas, FHA and VA loans can extend to as high as $729,750.