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
total of over $18,000 MORE over the course of the loan due to the
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