Edmonds Undressed

Stimulus package could cut “jumbo” loan rates

If you’re in the market for a new home, especially in an area where housing prices are typically high, it might make sense to wait a few weeks. Doing so could mean a significant reduction in your monthly mortgage bill — that is, if the lending industry and congressional leaders have their way.

Both groups have been lobbying President-elect Obama to include in an economic-stimulus package a provision that would again raise the limits on “conforming loans,” which are mortgages eligible to be purchased by Fannie. The threshold figure for what constitutes a conforming loan varies by region.

Last year, the conforming-loan limit was raised from $417,000 to $567,500 for King, Pierce and Snohomish counties. And in the New York City area, it was temporarily increased from $417,000 to $729,750.

The limit was raised to help to bolster demand for higher-priced houses in a slumping real-estate market. The government made a similar attempt to spur sales in late 2007, when it decided to keep the conforming-loan limit at $417,000, reversing a long-standing practice of moving the limit in accordance with the housing market. (Because the average home price fell in 2007, the limit should have been reduced.)  On Jan. 1, the conforming-loan limit was set at $625,500 in all regions, disadvantaging borrowers in areas of higher-cost housing.

Share