Jumbo home loans start at $417,100 and above. A new bill could be push conforming loan limits up to $729,750 and make jumbo mortgage loans anything above $729,750. This will be a major move to offset the housing price and sales decline. As a result, this will be an increase the mortgage loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). The critical role that Fannie Mae and Freddie Mac (GSEs) play in providing liquidity to the mortgage market has never been more evident than it is today. The national sub-prime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.
Raising the GSEs’ conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on our already fragile housing markets. According to the National Association of Realtors®, increasing the GSE loan limit will result in more than 300,000 additional home sales and strengthen current home prices by 2 to 3 percent.
I also believe that increasing the FHA loan limits is critical to helping bolster our fragile housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high costs states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices. These increases will help an additional 138,000 Americans purchase and 200,000 families refinance their homes safely and affordably.
Would you rather pay jumbo mortgage rates or conforming rates? It’s a no-brainer answer if you ask me. If the bill gets passed, and it should, you can expect many homeowners who fit into the jumbo mortgage area to refinance and buyers who were on the sidelines to find better mortgage programs and with lower rates for purchases. Homeowners will also feel some relief as home values start stabilizing with the increased sales activity. In addition, world financial markets could calm down, as well as the employment data. It sounds like a win-win situation for everyone; bargain purchase prices for buyers who were on the fence and refinances with lower mortgage rates for homeowners using conforming loan amounts and stabilizing prices.
By: Mario Olivera
Posts Tagged ‘Fha Loans’
Refinancing With Higher Conforming Loan Limits
May 30th, 2010Refinancing Home Loans – An Introduction
April 18th, 2010
Homeowners today don’t give a second thought before refinancing their home loan every time interest rates fall. People while trying to refinance don’t wait to consider if it’s a good or a bad idea. Moreover they always fail to look at the bigger picture. Refinancing home loans is a common practice today and you need to look into each and every detail before you take out another mortgage loan. Before we go any further let us understand what refinancing means:
What is Refinancing?
The original loan secured by a buyer to buy a home is called a purchase-money loan while a refinance loan is taken by a borrower to pay off the amount of the original loan. In case of an individual who continuously refinances his loans every time there is a drop in the interest rates (also called as a Serial Refinancer), the new loan pays off the last loan amount.
Serial Refinancers often go about refinancing their mortgages again and again without realising the fact that every time they refinance, they not only keep on adding more principle toward the end of the loan but also extend the term of the loan.
Kinds of Refinancing
With proper study and research, refinancing home loans can become an easy task. It’s possible to take out a different kind of loan at the time you refinance but is very necessary to understand all that is involved (terms and conditions) in the new loan procedure before you apply for a change. Some common loan types are mentioned below:
Interest Only Mortgage.
Option ARM Mortgage.
Adjustable Rate Mortgage.
FHA Loans.
Reverse Mortgages
Drawbacks of Refinancing
Here are a few:
Costs
Are you paying a certain fees in order to obtain a new loan? Well, fee means money, money which you might not be able to recover through a low interest rate for around a couple of years. Relevant calculations are beyond the scope of this write-up. Go online to refer to specific details.
Longer Amortisation Period
Remember that if you refinance a 20 year long loan with 15 years remaining, with another 20 year loan, then you’ve just turned an original 20 year plan to a 25 year plan. You need to take care of such things!
Benefits of Refinancing
Here are a few:
Lower Monthly Payments
If you are someone who is not into planning too much into the future, refinancing may be a good option as it will insure lower monthly payments, i.e. greater monthly cash inflow.
Cash In Hand
Many people obtain cash so as to invest it for a higher rate than the current interest rate. Hop online to read detailed documents on the procedure of refinancing and make better decisions while getting home loans.
By: Michel Disusa