Eric Nelson of Silicon Valley Funding writes:
In 2008, as a response to the collapse of the mortgage market, federal regulators created a new category of mortgage, the high-balance conforming loan. Since that time, loans have been available up to $729,750 in high-cost areas at rates lower than those for full “Jumbo” mortgages.
Conforming loans are those that have a loan balance under $417,000 which can be re-sold by an originating lender on the Fannie Mae and Freddie Mac federally sponsored mortgage markets. This allows the lender to re-lend the same funds over and over again and is important to the liquidity of the lending market. The high balance conforming limits applies to mortgages between $417,001 and $729,750. This program was created to support the economy by assisting high-balance borrowers during the financial crisis and was temporary.
Starting October 1, 2011, the high balance conforming loan limit will drop to $625,500. This in turn means that interest rates on these loan amounts between $625,500 and $729,750 will be HIGHER starting October 1, since they will no longer be backed by the government. After October 1, any mortgage over $625,500 will officially be a “Jumbo.”
Interest rates this week are among the lowest we’ve seen in 2011 and it is not expected that the federal government will extend the high balance conforming loans up to the $729,750 level again in the near future. Fixed rate loans have seen the largest drop and are currently the lowest interest rates we have had in the past 40 years.
If you are planning a purchase or refinance and you will need a loan amount between $625,500 and $729,750 you should get the process started immediately.
Eric can be reached at email@example.com and 408-268-2442, and has been helping people finance their homes since 1987.