Super-size That Loan

By Elyse Umlauf-Garneau 
 

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The refund many taxpayers would be getting grabbed the most attention when the Economic Stimulus Act of 2008 was signed in February. But also included in the bill was a temporary increase to conforming loans insured by the Federal Housing Administration.

Previously, the limit for all jumbo loans was $417,000. That figure could help if you?re buying in Fresno or Pomona. But it wouldn?t even let you step inside a Bay Area condo. But now there are higher regional caps for jumbo-conforming loans, meaning Fannie Mae and Freddie Mac can buy mortgages up to $729,750 in certain high-cost housing areas.

What that means for you: Where once your financing choices were limited to exotic, sometimes risky loans, these higher limits broaden your options when refinancing or shopping in expensive markets. The new limits are set at 125 percent of the median sales price of an area. At press time, for example, such loan limits in San Francisco for a single-family property would be $729,750, while the median price of a home in February was $706,880. Or consider Los Angeles, where the conforming limit is now $729,750 and the median home price in February 2008 was $467,200. Buying in San Luis Obispo. The conforming loan limit drops to $687,500. To find loan limits in your area, use the link in the left column.

If you're interested in a quick, no-documentation loan, this one?s not for you because lending standards are pretty tight. Some requirements include:

- Full documentation of assets.

- Appraisal with interior and exterior inspection.

- FICO credit scores of at least 660. For instance, the minimum score for those buying with down payments of less than 20 percent on primary residences is 700. Freddie Mac requires a 40 percent down payment and a FICO score of 660 to finance second homes and investment properties.

- No late payments on the existing mortgage in the lesser of the past 12 months or the life of the loan.

Though some anticipate the new loan limits to stay in place past this year, right now they're set to expire Dec. 31, 2008. Consult your REALTOR® about the listings in your area that may qualify for a conforming loan.

Jumbo Factoids

- Previous Limit: $417,000

- New Limit: $729,750

- Deadline: These limits are set to expire Dec. 31, 2008.

- For loan limits, see https://entp.hud.gov/idapp/html/hicostlook.cfm or use an interactive map www.fhaoutreach.com.

Size Costs

Interest rates for jumbo loans are higher than those for conventional loans. At press time, these rates were 7.04 percent versus 5.76 percent for conventional fixed-rate mortgages.

Source: Bankrate.com

Elyse Umlauf-Garneau is a Chicago-based real estate writer.