Are you planning to move to a new house? With the Federal Housing Finance Agency planning to lower the caps on federal mortgages, it might be the best time to make a move.
According to the current standards, the homeowners can get a federal mortgage of up to $417,000 throughout the country and $625,500 in the expensive counties. The agency has not reportedly released the amount; however, even a decline of $25,000 would affect thousands of homebuyers in both the segments: upper-priced and mid-level houses.
As mentioned by the LPS, as many as 214,000 federal mortgages originating last year fall within $25,000 of the current federal caps. The number of mortgages stood at 95,000 during the first six months of the current year. According to the LPS records, these federal mortgages are most popular in the Cook County, III with more than 10,510 mortgages in the previous year and 4,137 during the first half of this year falling under the $25,000 limit of the current caps.
The total number of mortgages falling under this category account for less than 3 percent of the overall mortgages backed by Fannie Mae and Freddie Mac; although, the numbers may vary from one county to another. According to the experts, with a capping of more than $25,000, most of the homebuyers would be left with fewer options to choose from.
Fannie Mae and Freddie Mac loans were not so generous before the real estate bubble burst and they were capped at $417,000 until 2008. Most of the private mortgage providers left the market after the bubble burst and the federal agencies considered increasing the mortgage cap to stimulate the market. A higher cap allows more customers to afford a new home and qualify for the loans.
With the mortgage market recovering along with the real estate industry, the government is planning to minimize its role in the mortgage market. It is an important step to reduce the mortgage risk exposure faced by the taxpayers. The government is planning to motivate private institutions to get involved in the mortgage finance industry.
However, the experts are skeptic about the client selection process of private mortgage providers. Most of the private institutions are more selective in their approach and it might leave a majority of homebuyers out of funding options. As a result, the experts are suspecting a potential decline in the sales and home prices. Moreover, the increase in home prices would make it even more difficult for potential homebuyers to get the funds required for a new house.
It is goin to be a tough call and a lot depends over the factor that whether these private institutions will open up to the less-affluent borrowers in future. With the fedral policies soon to be in effect, it is the best time to get your dream home!