Fannie Mae loan limits are to be decreased starting October 1 this year, which means that mortgage borrowers seeking large loan amounts may be stuck having to pay significantly higher rates. If you're thinking of taking advantage of the great rates available right now and you have a large mortgage in a so-called "high cost" county, get the financing you need this summer - it may no longer be available this fall.

After the subprime bust and subsequent credit crunch, Congress authorized Fannie Mae to start purchasing one unit residential mortgages larger than the standard conforming limit of $417,000 in designated high cost areas. Before the change, loans bigger than $417,000 were considered "jumbo", which meant they were ineligible for purchase by Fannie Mae, were tougher to qualify for, and typically carried significantly higher interest rates.

Before the increase, the loan limits were as follows for most one unit residential properties:

Conforming - up to $417,000
Jumbo - greater than $417,000

Today, the loan limits are as follows:

Conforming - up to $417,000
Super Conforming - $417,001 to $729,750 (in designated high cost areas)
Jumbo - greater than $729,750

The creation of the super conforming category meant that borrowers with home loans in high cost areas could borrow up to $729,750 with terms very close to what conforming borrowers had been enjoying for years. No longer did they have to seek significantly more expensive and restrictive jumbo financing.

Super conforming rates tend to run higher than conforming rates, but not by much. The typical rate difference I see is only around .125% to .375% - as opposed to the 1% to 1.5% rate difference I see between conforming and jumbo. That 1% to 1.5% rate difference can add up to a lot of interest on a large mortgage, thus the higher loan limits have been nothing short of a gift from above for borrowers able to take advantage of super conforming mortgage terms.

What government giveth, it also taketh away, so it's not surprising that we're to see adjustments to the loan limits later this year. The $729,750 limit is to be reduced to a new permanent loan limit for most mortgage borrowers of $625,500. This means that mortgage borrowers living in high cost areas with loan amounts greater than $625,500 will now be back in the jumbo category and subject to higher interest rates and more restrictive underwriting criteria.

Again, if you have a large loan that will be impacted by the upcoming loan limit decrease, and you haven't yet taken advantage of the great mortgage rates available right now, definitely get your financing done this summer.

For more information about the current Fannie Mae loan limits and the upcoming changes, check out the Fannie Mae website.