More research and a reminder on conforming loan limits for next year and came across a great article at bankrate.com
I have copied and pasted it to this blog but all credit goes to bankrate.com, thank you bankrate for keeping us informed with great and understandable commentary.
2009 CONFORMING LOAN LIMITS: Want to know how much you can borrow for a house next year without having to pay a higher rate for a jumbo loan? Prepare to be confused.
What we’re talking about is something called the “conforming limit.” The conforming limit is the maximum loan amount that Fannie Mae and Freddie Mac may buy. Any loan above the conforming limit is a jumbo loan — and jumbo rates are higher.
The conforming limit changes in most years to reflect gains in house prices. For 2006, the conforming limit jumped 16 percent, to $417,000. That new limit was announced in November 2005, about a month after house prices reached their peak — in other words, right around the time the housing bubble popped.
At any rate, the conforming limit remained $417,000 in 2007 and this year, too.*
Before I explain what that asterisk means, let me give you the bottom-line story and tell you that the base conforming limit** will remain $417,000 in 2009. That’s according to today’s announcement by the Federal Housing Finance Agency, the new overseer of Fannie and Freddie. But the jumbo conforming limit*** has been changed.
The conforming limit would have been lowered, per the policy of the FHFA’s forerunner, OFHEO (do you really care what that acronym stood for?), but this year’s economic stimulus law specified that, if house prices fall, the conforming limit is supposed to stay the same. The conforming limit is a one-way ratchet: It can go up, but not down.
The conforming limit matters, big time. This week, the average rate on a 30-year, fixed-rate, conforming mortgage was 6.44 percent. For a 30-year jumbo, the average rate was 7.76 percent. On a big loan, that difference in rate makes for a big disparity in monthly payments.
To give you a “ferinstance,” a $417,000 conforming loan at 6.44 percent has monthly principal and interest of $2,619. A $418,000 jumbo at 7.76 percent has monthly principal and interest of $2,997.
* Early this year, the government introduced a “jumbo conforming” limit for high-cost areas such as Southern California and resort areas in Colorado. This limit depended upon house prices in the most expensive community in a county.
** In most counties, the conforming limit remained $417,000. That’s the base conforming limit. In pricey places such as San Francisco, the jumbo conforming limit maxed out at $729,750, and couldn’t go higher than that. In a few big cities, the jumbo conforming limit was somewhere in between.
*** According to provisions of the housing recovery law that was passed this summer, the jumbo conforming limit in 2009 will be $625,500. This means that if you live in a high-cost area where the jumbo conforming limit is higher than $625,500, you have a month and a half to get a mortgage within the current jumbo conforming limit. If you understand the previous sentence, this change probably affects you; if you don’t understand, it probably doesn’t affect you, so you can ignore it.
For more information click on Bankrate.com