SACRAMENTO, Calif. -- The newly approved increase in the loan ceiling for mortgages to veterans is helping families to graduate to the next level of homes, stimulating the housing market from the bottom up, say California mortgage brokers.

According to Pamela Strickland, president of the 2,500-member California Association of Mortgage Brokers, the increased ceiling of $203,000 approved by President Clinton will play a part in an improved housing picture for California in 1995.

Qualified veterans and reservists are offered 100% financing on any loan under the new ceiling amount.

The VA ceiling is keyed to the maximum loans offered by Fannie Mae and Freddie Mac. The two agencies decided this week to hold their ceiling at $203,150 for another year despite a slight dip in home prices.

"In many California communities, the difference between $184,000 [the previous loan limit] and $203,000 can mean the difference between getting into a home and not," said Mr. Strickland, who speculated that the ability to afford more amenities and larger homes would push many fence-sitters into buying their first homes.

Many mortgage brokers are looking at affordable-housing to stimulate business, an association announcement said. Numerous affordable-housing programs, aimed at low-to-moderate-income borrowers, are already in place.

Veterans and low- and moderate-income consumers are expected to show up in increasing numbers to buy homes as the housing picture statewide continues to improve.

Veterans can combine their increased purchasing power with tax subsidies offered in various California cities and counties, resulting in 30 to 40% greater purchasing power in some cases, Mr. Strickland pointed out.

"Armed with higher loan limits and these companion subsidies, and therefore much stronger options, these consumers are coming to the table ready, willing, and able, to make all-important home-purchasing decisions," he said.

"This bodes extremely well for the spring purchase market."

The California group believes this is a good time for mortgage brokers because people tend to shop harder for the best deal as interest rates climb.

While all segments of the industry are struggling, brokers, who deal with many lenders and are familiar with many subsidy programs, are in a strong position to find suitable mortgages for customers, according to the group's announcement.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.