Are there new mortgage limits in the Bush stimulus package?
Theoretically, yes.
The focus of all the writing about H.R. 5140, the Economic Stimulus Act of 2008 which President Bush signed Wednesday, has been the tax rebates.
But for those of us in the real estate world, the mortgage provisions are waaay more interesting. A section of the Act, Title II, will raise the limits that loans can hit (”conforming loan limits”) to be bought by Fannie Mae and Freddie Mac.
In other words, the line where a mortgage crosses from jumbo to conforming gets hiked.
In other, other words, that $500,000 mortgage that you were going to pay 6.75% for will probably only cost you 6.25%.
That’s $1,800 a year, a lot of money to a first-time homebuyer.
How this is all going to shake out is kind of technical, because the limit move will be capped at 125% of the average price in your region, and only the government knows how they want to define those regions.
But in New York, San Francisco and Chicago — places where prices are high and first-time buyers need the help — the limit could come up as high as $729,750.
The rate savings is going to be hard to predict too - I used sample rates that may seem a little on the high side, to balance out a quarter-point to half-point penalty that New Yorkers might suffer for buying a co-op. Your savings could be as high as full percentage point, which nicely balances out the quarter-point that rates have moved up recently.
Check with your lender, especially if you’re looking for a loan in the $417K to mid-$600K range and have a credit score above 700 or so. It’s worth exploring because sometimes mortgage lenders forget to give you that last quarter point of savings unless you ask for it.
For the geeks, a great article from Inman News here and one more from Mortgage News Daily here