In the past week, jumbo conforming loans have become almost as affordable as standard conforming loans thanks to higher loan limits and a drop in bank interest rates. That’s good news for high-cost markets and homeowners with equity in their homes who may be able to refinance to a lower-cost standard conforming rate. However, borrowers still face tightened lending requirements.
MAKING SENSE OF THE STORY FOR CONSUMERS
- Last week, a 30-year fixed-rate jumbo conforming loan with no points averaged 6.125 percent, compared with 5.875 percent for a standard conforming and 6.75 percent for a regular jumbo loan. Jumbo conforming loans are used for home purchases between $417,000 and $729,750, while standard conforming loans apply to homes with a purchase price below $417,000. Conforming loans are those that meet certain underwriting criteria and can be guaranteed by Fannie Mae and Freddie Mac. A lower rate could save borrowers several hundred dollars a month in mortgage costs.
- Both Fannie Mae and Freddie Mac require jumbo loan borrowers to make a higher downpayment (in the 10 percent to 15 percent range); require higher credit scores; provide income documentation; and typically have lower debt-to-income ratios than standard conforming loans.
- Congress recently increased the maximum loan amount to 125 percent of an area’s median home price up to $729,750. The new higher rates were intended to more accurately reflect home prices in high-cost markets and to stimulate housing market activity by allowing lenders to package more loans for sale to Fannie Mae and Freddie Mac.
To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/13/BUBV10L0PG.DTL
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