Some good news in property financing
By Keith Woeste, Pacific Equity Mortgage
The recent passage of the economic package in Washington, D.C.,
has done more than put money back into our pockets; it has helped
many homeowners and potential homebuyers.
Some good news in property financing
By Keith Woeste, Pacific Equity Mortgage
The recent passage of the economic package in Washington, D.C., has done more than put money back into our pockets; it has helped many homeowners and potential homebuyers.
A big part of the stimulus package that many people are not hearing about is the increase of the conforming home loan limit. But what does that mean.
What is a conforming loan? A conforming loan is backed or insured by the federal government. You have heard of Fannie Mae and Freddie Mac. They are federal agencies that back these loans and insure them, thus making them more attractive to banks because they know they are backed by the federal government. The maximum until recently was $417,000. Anything over that maximum was considered a “jumbo loan.”
The new conforming loan limits are 125 percent of the median price for a given area, to a maximum of $729,500. Guess who they put the maximum in for? Californians, especially the Bay Area, and New Yorkers – two of the most expensive places to buy real estate in the country.
This is awesome news for many home owners and home buyers. Why?
Because lending guidelines are much less stringent than “jumbo loan” guidelines.
Interest rates are 1-2 percent lower than a “jumbo” interest rate. As an example, a 30-year fixed mortgage conforming is 5.75 percent. A 30-year fixed jumbo is 7.25 percent.
Credit scores are not as tight.
Loans at 95 and 100 percent are still available.
There are many more documentation type loans available, such as full document, stated income/verified asset and stated income/stated assets.
But the biggest thing is that many people will be able to keep their homes. It is estimated that this increase of the conforming limit will enable some 200,000 families to refinance. Many homeowners who currently have adjustable rate mortgages that have reset or are about to reset will be able to refinance to a lower interest rate.
The same holds true for the homebuyer. With less restrictive guidelines as far as down payment, credit scores and loan programs, what is already a buyer’s market becomes a buyer’s feast. It is estimated that this increase will allow about 150,000 more people to purchase homes.
Additionally, many believe that it will get our real estate market started back in the right direction. This increase in the conforming loan limit could result in upwards of 300,000 in home sales and an increase of 2-3 percent in home prices.
Does this mean the days of multiple offers and price bid-ups are back? I do not know. But it will definitely help many people keep their homes and other obtain their dreams of buying one.
Keith Woeste is affiliated with Pacific Equity Mortgage. Comments or questions can be directed to ke*********@ya***.com or by calling 801-8677.
