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| More rates and news from Jumbo And Conforming Loan Limits Stay The Same
(If you are unfamiliar with the mortgage industry, two important names to know are Fannie and Freddie. )
No, these aren’t the names of two brokers who will cut you a good deal on your mortgage, but rather Fannie Mae and Freddie Mac are the two biggest mortgage companies in the world.
They buy bundles of loans and sell them out to different companies. They handle most of the mortgages that are enacted in the United States.
One thing they regulate is the maximum amount of money people can take out in a mortgage before it is considered a jumbo mortgage.
This year, the amount for a jumbo loan and conforming loan have stayed the same.
According to a November 29, 2006 article by Holden Lewis of Bankrate.com, “Jumbo, conforming mortgage limits unchanged in 2007,” borrowers will see no change in the amounts that are acceptable compared to last year.
“The conforming mortgage limit between regular mortgages and jumbo mortgages won't rise in 2007, but at least it won't fall. But if home values fall again next year (as they did this year), government regulators might decrease the conforming limit in 2008.”
This can all be a bit difficult to understand, so lets back up a little bit to understand conforming and jumbo mortgages a little more.
“Conforming mortgages are home loans that conform to standards set by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy bundles of mortgages and sell them as investments. Fannie and Freddie act as pumps that keep money circulating through the mortgage financing system. The conforming limit marks the maximum loan size that Fannie and Freddie may buy or guarantee.”
Once you pass that amount, you are heading into jumbo loan territory.
“A mortgage that's bigger than the conforming limit is called a jumbo loan. Rates on jumbo mortgages tend be one-eighth to one-quarter of a percentage point higher than comparable conforming mortgages. You can check the rates of both types of loans on Bankrate's mortgage search tables.”
The conforming limit stands at $417,000 for a single family home in the continental United States. For Alaska, Hawaii, Guam and the U.S. Virgin Islands, the amount is a bit more at 625,000.
“Normally, the conforming limit rises and falls along with house values. The limit is pegged to the change in average house prices from October to October, as measured by the Federal Housing Finance Board. Today the board reported that the average U.S. house price fell $501 in the 12 months ending in October. This October, the average price was $306,258; in October 2005, the average price was $306,759. That's a drop of 0.16 percent.”
Although home price have fallen, Fannie and Freddie decided not to change to conforming rate because it would disrupt the mortgage market.
“Lowering the conforming limit without giving ample warning could cause problems because it sometimes takes lenders a few months to sell their mortgages on the secondary mortgage market.”
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