On Thursday the Senate passed an economic stimulus package that included a provision to raise the mortgage loan limits for FHA and conventional mortgage loans. The House of Representatives passed the legistlation last week, and now it is headed toward the President, who is expected to sign it.

Presently, any loan over $417,00 is a jumbo loan (subject to higher mortgage rates) and ineligible for FHA for the Riverside County California (including Hemet, Murietta, Temecula and the surrounding areas).

The new loan limits would be 125% of the local median home price. This would be as high as $729,750 in high cost areas...and that is the number reported in the news. But what would it be in Riverside County?

In 2007 Riverside County's median home price dropped more than the other five counties of Southern California: 17.8% to $381,400. (Click HERE for median home prices)

125% of the median home price is currently $476,750.

In other words, FHA and conforming loan limits may increase from $417,000 to $476,750.

For those with slightly higher loan balances it's great news. For those buying luxury homes in Riverside, Murietta, Temecula, Palm Springs, Hemet, Banning or Beaumont, it's not much difference. It makes a bigger difference in Orange County, San Diego County or in Northern California, where less affordable housing is the norm.

According to my source at Freddie Mac, once the President signs the economic stimulus package, it's unclear whether the changes would take place within 30 days or by July 1st. Also unclear is how investors will price the loans differently. In other words, if the mortgage loan limits are higher, and there are higher level of defaults for larger mortgages, would they respond by increasing the cost of home loans (interest rates and/or loan fees) for conforming loans? Freddie Mac and Fannie Mae are GSE (Government Sponsored Enterprises) who provide a crucial role in mortgage liquidity.

For those in higher cost areas, this will make a bigger impact and could help people with higher cost loans improve their financial situation.

Be sure to thank your Realtor for the benefits of the legislation, which is partly a result of lobbying from the National Association of Realtors.

Joey Aszterbaum is the Hemet Home Loan Guy and a member of the Active Rain social network of real estate professionals. To buy or refinance your home in Hemet, Riverside County, or California visit www.HemetHomeLoans.com or call 951.571.5751