For many house hunters, these are good times. Home prices have fallen 10% or more in once-hot markets, and interest rates on mortgages of $417,000 or less have sunk to their lowest levels in four years. Today a family with solid credit and enough cash for a 20% down payment can lock in a rate of only 5.9% on a 30-year mortgage, according to Bankrate.
Consequently, banks have cut way back on lending, tightened standards, and hiked rates on jumbos, all of which they now must hold on their own balance sheets. Even for wealthy borrowers with sterling credit and enough cash for a 20% down payment, the cost of fixed-rate jumbo mortgages is now upwards of 7% for a 30-year loan.
The positive news at least for those seeking a smaller jumbo mortgage is that Congress feels your pain. As part of the economic stimulus bill signed by President Bush last week, the limit for Fannie and Freddie mortgages will be temporarily raised from $417,000 to $729,750.