Jumbo loan interest rates went through the roof after the secondary market for mortgages seized up in 2007 and the result was that housing sales requiring jumbo mortgage financing ground to a halt.
Unfortunately, for those in high cost areas like California and Florida, this meant a drastic reduction in available financing for a home purchase or refinance. In some areas of those states (and many others) the maximum "conforming" loan limit of $417,000 for a single family house is well below the average cost of a home.
(A "Conforming" mortgage is a "non-jumbo" mortgage that is sold to Fannie Mae or Freddie Mac, otherwise known as the GSE's or "Government Sponsored Enterprises").
Congress Steps In
In remarkably quick fashion, Congress worked to carve out legislation to fix the problem and they have authorized the GSE's to purchase larger loans. This has given mortgage lenders the ability to make jumbo loans available at "conforming" rates to those who live in high cost areas.
It is a temporary limit until December 31, 2008, but given the poor state of the housing market (and given our country's reliance on housing to fuel the economy) it is starting to look like it might be a long term solution.
The maximum loan amount is now $729,750 in a few of the highest cost areas, otherwise it is 125% of the average home value within your metropolitan statistical area or MSA as determined by OFHEO, the Office of Federal Housing Enterprise Oversight.
Excellent Jumbo Mortgage Rates
The net effect of the temporary increase in the loan limits is that those in the most expensive zip codes can get an excellent jumbo mortgage at a conforming rate - hence the term: "conforming jumbo loan."
This is truly a great opportunity for those in the high cost areas when you consider that most "traditional" jumbo loans that are not purchased by Fannie and Freddie have been north of 8% for some time now.
The hope is that enabling the GSE's to purchase these loans from lenders will spark more housing activity in the areas that have been hardest hit by the credit and housing crisis.
One thing is for sure, the rates on these "new" jumbo mortgage loans are excellent.
Those needing jumbo financing in the following areas stand to benefit the most from the new limits:
Arlington and Alexandria, VA
Athens, OH
Bend and Medford OR Metro Area
Boston-Cambridge-Quincy Metro Area of MA, NH
Bridgeport - Stamford - Nowalk, CT Metro Area
California
Charlottesville and Richmond, VA
Colorado
Elizabeth City and Kill Devil Hills area of the Outer Banks of NC
Flagstaff, AZ Metro Area
Florida
Gardnerville Ranchos, NV
Greene County, Lake Oconee Area of GA
Hawaii
Jackson, WY
Maryland
Massachussetts
Nashville - Davidson - Murfreesboro - Franklin, TN Metro Area
New Jersey
Norfolk, Newport News and Viriginia Beach, VA
NY Metro Area
Philadelphia, PA Metro Area
Pike and York County, PA
Portland - Vancouver - Beaverton, OR-WA Metro Area
Providence - New Bedford - Fall River RI-MA Metro Area
Salt Lake City, Heber, Summit and Tooele, Utah
Sante Fe, NM Metro Area
Seattle, Tacoma, Bellevue, Jefferson and San Juan counties in WA
Teton, Blaine and Valley counties in Idaho
Washington DC Metro Area
Williamsburg, Winchester and Lancaster County, VA
Here is a link to the OFHEO website and with a complete list of all areas and maximum loan amounts for these new jumbo loans: OFHEO MSA LIMITS.
New Conforming Jumbo Loans - Principal Features
1. Minimum middle FICO credit score is 660 for any loan and 700 is the minimum for loans with a loan to value greater than 80%.
2. One unit (single family) properties only.
3. Fixed rate loans for a principal residence are available up to 90% loan to value. Arms available to 80%.
4. Cash-out refinances are allowed for primary residences only.
5. Interest-only options are available.
6. Second homes and investment properties require 40% down - cash out refinances are not allowed.
7. You can not have any late mortgage or rent payments in the last 12 months.
8. The maximum "debt to income ratio" is 45%.
9. Only loans that have fully documented income are eligible.
10. You must make at least a 5% down payment from your own funds.
John King of MyMortgageBanker.com specializes is helping the self employed and business owners obtain residential and commercial mortgage financing and working with those who need jumbo mortgage loans.
