(10/05/2010) In what's at least a year-long reprieve from some higher housing costs,
President Obama is expected to sign legislation that comes with a provision
to extend the current high-cost-area conforming loan limit through 2011.
The provision means homebuyers and homeowners in expensive housing
markets will continue to get a break on interest rates when they buy or
refinance.
Conforming loans come with cheaper rates than non-conforming or so called
"jumbo" mortgages, because they are backed by the government.
Now that the federal homebuyer tax credit has expired, cheaper rates are
crucial to the housing recovery.
Federal lawmakers recently voted to keep the maximum size of loans
guaranteed by Fannie Mae and Freddie Mac and the Federal Housing
Administration (FHA), for high-cost areas, at the current $729,750
level.
Real estate agents, mortgage bankers, homebuilders, and others, arguing
the housing market would suffer with lower conforming limits, lobbied to
keep the upper limit in high-priced markets.
The limit applies to areas that include California and New York. Alaska,
Hawaii, Guam and the U.S. Virgin Islands get even higher conforming loan
levels.
Without the change, the limits would have fallen to about $625,000. The limit was $417,000 before 2008 and remains
at that level for most of the country.
"CAR applauds our congressional representatives for their actions to
extend the higher loan limits through 2011," said CAR President Steve
Goddard.
"Without the extension of the higher loan limits, many California
borrowers would have a harder time refinancing homes and obtaining financing
for new home purchases," he said.
On September 28, Erate.com reported the average
rate for 30-year, non-conforming jumbo loans came in at an average 5.18 percent.
Meanwhile, conforming loan rates averaged 4.51 percent.
Many homeowners carry jumbo mortgages with interest rates in the mid to
high 6s. Current conforming mortgages area available for much less to
qualified homeowners who pay the standard .07 to 1 point origination fee.
If these homeowners had to refinance to a true jumbo loan of the past,
they would be doing so at fixed rates in the low 5's. Even some homeowners
burdened with two loans to avoid jumbo mortgage rates could benefit from
refinancing both loans to today's jumbo conforming fixed rate loan.
While borrowers must still qualify under the stiff current guidelines in
today's market numerous borrowers are able to refinance to a conventional
conforming jumbo loan for less, depending on their area.
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