Economic Stimulus Package Means Jumbo Loan Limit Increased to $730K - Many Previously Jumbo Loans are Now Conforming (and cheaper!)
Posted on January 24, 2008
Filed Under Finance, Tax Tips, Tips |
This is great news for buyers of homes in expensive areas like California and New York! The previous dividing line between conforming (normal) and Jumbo morgage loans was $417,000 - now it looks like it has been raised to $730,000. This means rates are about 1% less for a 30yr fixed rate loan!
Here’s an excerp from http://www.foxbusiness.com/markets/economy/article/winners-losers-stimulus-package_450854_3.html
Another group of clear winners should be mortgage lenders who will be able to make larger loans at lower rates to ease sales of existing and new homes. By that analysis, homeowners with their homes on the market could win too. Home sellers had been under pressure to reduce their asking price to make their homes affordable. With the prospect of lower rates, that’s not necessary. Sellers who were under pressure to lower prices now know buyers will be able to borrow more cheaply and have no incentive to reduce those prices.
Some simple math: a one percentage point reduction in the rate for a 30-year fixed rate $600,000 loan – the differential between rates “conforming” and “jumbo” loan — would reduce the monthly loan payment by about $280. That’s the same as a $63,000 reduction in the loan (or price of the home) if the interest rate had not been reduced. A seller might argue there’s no need to reduce the price of the house to make it more affordable since lower mortgage rates will do that.
Adding to the confusion, with the prospect of further rate cuts, borrowers are likely to sit on the sidelines waiting for markets to stabilize, so the program is not likely to have a “timely” impact on the housing market.
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