Are Jumbo Benefits Being Passed Through?
April 16th, 2008
Related FHA Stories
- FHA Mortgage Limits To Stay The Same In 2008
- Ginnie Mae To Issue Separate Securities For Mega Loans
- Are Bigger FHA Loan Limits Ahead?
- Should we bring back higher FHA loan limits?
- Loan Limits Become Complex in 2009
Alan Sloan, the financial writer, makes an interesting point regarding the new and higher FHA loan limits for 2008.
Under the Economic Stimulus Package, the maximum conventional loan rose from $417,000 to as much as $729,750. Sloan points out that the bigger loans will be helpful to people in high-cost areas because with the bigger loans now defined as “conventional” financing they will result in an interest-cost reduction of about 1 percent when compared with “non-conforming” mortgages.
“In today’s market,” says Sloan, writing in the Washington Post, “the interest difference between a conforming loan and a non-conforming loan for a 30-year fixed-rate mortgage is a whopping 1.27 percent a year, according to Keith Gumbinger, a vice president at HSH Associates, a mortgage research firm. So a $700,000 conforming loan at 6.01 percent would carry almost $9,000 less annual interest than a nonconforming loan (at 7.28 percent).”
The question, though, is whether borrowers can actually capture such benefits.
Henry Savage, with PMC Mortgage in the Washington, DC metro area, notes that “the new loan limits for Fannie Mae and Freddie Mac are now being accepted by various lenders. The outcome is disappointing. Every lender I surveyed is charging about one full percent for the so-called “conforming-jumbo” loans to be sold to Fannie and Freddie. This does not significantly differ from the current jumbo rates.
“However, one investor is currently offering the jumbo conforming fixed rate loans with no rate increase. This means homeowners living in high cost areas can obtain conforming fixed rates if their loan amount doesn’t exceed $729,750. The lender is not accepting loans in DC or Maryland.”
What about other areas of the country? Are borrowers getting discounts on conforming jumbo products? What about newer and bigger FHA loans?
For the full column by Mr. Sloan, see: Happy Tax Day, Homeowners!
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