New Conforming Loan Limits

The U.S. House of Representatives passed a bill to allow for the increase of conforming loan limits in areas where values are much higher than the national average. This will have a HUGE impact on areas like California where home values are averaging close to 600K in some areas.

Conforming loan limits are currently $417,000 and leave most homes in areas like Orange County forced to finance into JUMBO loans (anything over 417K). The interest rates for jumbos can be as much as 2% higher on high loan - value properties with marginal credit scores. Many homeowners are in that exact position. They have been unable to qualify for refinance due to the limited number of jumbo programs and the stringent qualifiers.

With the increase of conforming loan limits to as much as $729,750 it will create the opportunity to lower payments for many of these borrowers. If the property qualifies, they will be able to apply for a conforming loan rate which can be under 5% without negative amortization currently (3 - 5 year ARMS).

President Bush is expected to approve the bill this week. If approved, it will be effective for 2008 only but the National Association of Realtors, among others, are lobbying to make the change permanent.

The best thing you can do in the current rate environment is to take advantage of the accelerated mortgage options. You determine the amortization and can pay off the home much faster WITHOUT increasing the payments. It takes advantage of principles use for decades in the UK and Australia and can literally cut 20 years off a 30 year loan with no changes to spending habits.

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