STIMULUS PACKAGE, RAISE CONVENTIONAL AND FHA LOAN LIMITS TO $729,750

Yes, the economic stimulus package includes raising conforming loan limits from $417,000 to $729,750. That is if it passes!
This is the best news I have heard and here is why. Today, when a loan amount is over $417,000, then you need to get a JUMBO loan. I know prices of homes are down, but come on. It use to be that JUMBO rates were .25% to .375% higher than conforming rates (conforming means not JUMBO or under $417,000, loans that are covered by FNMA and FHLM). However, today, because of the mortgage meltdown, we see a spread of 1% or more. This is a huge spread. When we look at today's rates at 5.375% for conforming then a JUMBO maybe 6.375%. That is an 18% jump in the interest rate a borrower pays. It causes people to qualify for a lower mortgage and thus have less affordability. Right now we need to increase affordability to increase demand and give the real estate market momentum. They are also looking at raising FHA limits to the same price. Again, I am all for that move. This is something the government can do that can actually help. Go get em...

Let me put this in perspective. A borrower with a $600,000 loan would pay interest of $3,188 per month at 6.375% interest rate, given a JUMBO loan. That same borrower paying the same amount of interest would be able to buy a home worth $111,628 more or have a loan amount of $711,628 and the same payment. This increases there purchase power. Or it can lower their monthly payment. If they stuck with the $600,000 loan, then their payment would go from $3,188 to $2,688. Saving them $500 per month. That will stimulate the economy!
It also helps people refinance while rates are low today. Because a borrower may not qualify today at a payment of $3,188, but does qualify at $2,688. Again, helping stimulate the economy and giving home owner security with their mortgage.

BREAKING NEWS
Federal stimulus package raises conforming loan limit
Thursday, January 24, 2008
BY WILLIAM JASONSTAFF REPORTERNORTH BAY, Jan. 24, 2008 – An economic stimulus package announced today in Washington includes mortgage reform that could serve as a major boost to the local real estate market. The package, agreed upon today by Democratic and Republican House leaders and the Bush Administration, would increase the size limits for government-sponsored loans to as much a $729,750.The proposal includes a one-year increase in the size of loans that can be purchased by Fannie Mae and Freddie Mac – government-affiliated companies and the largest buyers of mortgages on the secondary market – from $417,000 to up to $729,750. It would also let the Federal Housing Administration guarantee loans of up to $729,750, up from $362,000.
read the rest of this article at this link
http://www.busjrnl.com/article/20080124/BUSINESSJOURNAL/304340210/1218