When you go to finance a home, whether or not you qualify for a FHA jumbo loan is going to depend on what Fannie Mae and Freddie Mac say about the conforming loan limits in your area.
And in the Chicago area (as well as many other parts of the country), the conforming loan limit is $417,000. For FHA loans, it’s $410,000. But in plenty of other parts of the country, home buyers can finance up to $729,750 because they are considered “high-cost” areas.
And the Chicago and Illinois Realtors’ associations are trying to muster support to convince the agencies to raise the loan limit for high-cost portions of the Chicago area.
According to the Chicago Tribune:
“This is at the crux of the problem with the marketplace here,” said David Hanna, a former president of the Chicago Association of Realtors and a member of a local task force trying to change the loan formula for the Chicago area. “The loan limit here is the same as it is in Dayton or Columbus or Peoria or Pekin. That’s crazy. It’s fundamentally unfair. Everything else here mirrors higher-cost areas in other parts of the country.”
According to a brochure the group has developed to lobby the GSEs and congressional leaders, one remedy for the problem would be to base the lending limit for a Chicago-area county on 125 percent of the highest median home price of a given municipality within that county. Using 2006-2008 home values as an example, that would mean the lending limit would be $868,500 for Cook County, based on a median home price of $694,800 in Wilmette. Other county loan limits, using prices from the same time, would range from $417,625 in Kendall County to $1.125 million in Lake County.
If an increase of the jumbo loan limits for the Chicago area are approved through the Realtor Association efforts, many people think that the move would allow many homeowners who are currently up against the conforming loan limit to refinance into a more affordable loan program while rates are low.
