Is a buyer who is borrowing $450K to purchase a house going to get into a jumbo loan at jumbo rates, or a conforming loan at conforming rates?? The answer will surprise you.
On March 6th, Fannie Mae, Freddie Mac and the FHA (unfortunatley, VA loans were mistakenly left out) all announced new increased upper limits to their conforming loan products, as part of President Bush's economic stimulus package. What this means to the average buyer is that conforming loan limits can go up to $729,750.00 from the original $417,000. The new limits are temporary through the end of the 2008 calendar year, and only available in certain parts of the country where 125% of the median price exceeds $417,000. In those parts where the median price does not exceed $417,000, then the original upper limit of $417K remains. The point of the upper limits is to help borrowers/buyers, which in turn will help the economy.
Now, here's the kicker... Even though Congress has increased the upper limits on conforming loans, the banks are NOT playing along. Thanks to the economic stimulus package, the banks have now created a new level of risk and loan product. So, we have loans under $417K, where some banks call it "agency/lender conforming" loans where the interests rates are lower (lower risk loans). We have loans between $417K and Jumbo loans, where banks are calling "Super Conforming" loans and the interest rates are a bit higher (new bracket of moderate risk loans). And then there are the Jumbo loans, which are the highest interest rates of the various loan products (the most risk).
So, a buyer looking to purchase a house for $550K with 10% down is not going to get a jumbo loan with jumbo loan rates, thanks to the economic stimulus package. They are not going to get a conforming loan with conforming loan rates, thanks to the economic stimulus package. They are going to be getting something in between, not the best rates of course, but also not the worst.
So the questions begs. Was the increase in conforming loan limit part of the simulus package really to help the end borrower? Or was it to help the banks find more ways to make money in a troubling market? I know, it's all politics, but one has to ask the question...
--tim
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Timothy F. Lee, REALTOR®
BRIO Realty | MTG Finance
Office: 206.774.8639
Cell: 206.696.2664
Fax: 425.427.1734
TimothyFLee@gmail.com
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