How The Fed Bailout Affects You and Your Ability To Get a Mortgage

The question I've been hearing a lot lately is "How will the Fed bailout affect my ability to get a mortgage?" I came across a short and sweet explanation of the bailout's affect on mortgages over at Bankrate.com and wanted to share it with you here...

"Conforming mortgages. Home loans for $417,000 or less that meet guidelines devised by Fannie Mae and Freddie Mac, the government-controlled housing finance giants. The guidelines require borrowers to have good or excellent credit histories, and to have some equity in their houses -- either by making a down payment (when buying a house) or by having a house that's worth more than the amount borrowed in a refinance.

Mortgages are likely to remain available for qualified borrowers who get conforming loans, as long as they have sufficient equity. To qualify for conforming loans, borrowers might need to have equity of at least 5 percent or sometimes 10 percent or even 20 percent. The amount of necessary equity depends on where the home is, whether it's a condominium and other factors (such as credit history).

People who need to refinance, but owe more than their houses are worth, will not be helped by the powers the Treasury seeks. The Treasury's proposal isn't designed to bail out upside-down homeowners.

Jumbo mortgages. Home loans of more than the conforming limit. The jumbo limit varies, depending on location. In some places, it's any mortgage of more than $417,000. In expensive markets such as Los Angeles, it's a loan of more than $729,750. In some places, the limit is in between.

Lenders say jumbo loans, when available, have high rates and fees. This is a result of the credit crunch. If the Treasury's proposal goes through, jumbo loans might become more available and affordable. There's no guarantee of that, though.

Mortgages insured by the Federal Housing Administration (FHA). Loans for people who have so-so credit histories or who have down payments of only 3 percent or so. Those loans remain available for purchasers and for refinancers who can jump through multiple qualifying hoops."

Ultimately, you'll want to chat with a loan officer for further guidance. A loan officer will be able to determine which option is best for you, whether or not you'll qualify and what guidelines you'll have to meet based upon your specific financial situation.