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New Loan Limits = Lower Rates!


Fannie Mae and Freddie Mac have raised the limits for conforming loans they buy on the secondary market. English translation: there may be an opportunity for you to save money if you had a Jumbo mortgage loan at the time you purchased or last refinanced your property. [For purchases, you can buy a higher priced home and still have a lower rate.]

For single-family property, the loan limit has been raised by $11,000 to $333,700. This means you can now borrow MORE money at a lower rate before the Jumbo loan rate kicks in. Jumbo loans carry a rate that is .25% to .375% higher than conforming loans. To give you an idea of the difference this can make, consider someone who last year bought a home using a mortgage amount of $335,000. Because this was OVER the $322,700 conforming limit in 2003, this borrower was stuck with the Jumbo rate. The interest rate applies on the ENTIRE loan amount, even though it was only $1300 over the limit. This means a difference in monthly payment of $51.00 per month…a total of over $18,000 MORE over the course of the loan due to the extra $1300!

For anyone who now has a Jumbo loan, it may pay to review your particular circumstance with a mortgage professional. With higher conforming loan limits combined with the recent drop in fixed rates, this may be a refinance opportunity. What other types of scenarios might make sense?

Pay back a private loan that helped you get into the home. If you made use of money from a family member who helped you fund your home purchase, this may be an opportunity to pay back the loan while avoiding the higher payment of a Jumbo loan.

Lower your monthly payment for loan balances between $322,000 and $334,000. The savings of over $18,000 mentioned above may be worth considering. Be clear on your plans for the property so the right decision can be made when you explore the possibility with a mortgage professional. Your timeframe for holding the property will have a major impact on how to structure the loan.

Borrow an additional $11,000 at a lower rate for debt consolidation. Anyone who wants to get rid of credit card bills, medical bills, auto or student loans would ideally like to lower their total monthly out-of-pocket expenses. The advantage…instead of making several payments, they make just one for the new mortgage at the lower rate and may benefit from the tax-deductibility for doing so.

Squeeze out some extra cash for home improvements. Many borrowers can get enough money to make the improvements they want in their homes while keeping their monthly payments the same or even lower.

Qualify for a more expensive home. The additional $11,000 may help when it comes to making offers in the competitive home-buying market we are in. It may just make the difference for you in winning the offering game on a home purchase. It can also give you a bit more purchasing power in the upper end of your price range.

There are many more reasons for you to consider refinancing or buying a home under the new loan limits. Be mindful of your objectives, and speak with a mortgage professional to help you explore your possibilities.

 

 
 
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