Jumbo Loan? Cross Your Fingers!

Living in a "high-cost" housing area?

If you are in California, the answer is likely YES.

As you may know, "jumbo" loan limits are currently set at $417,000. That means if you need to borrow more than $417,000, you pay a premium - a higher percentage rate for your mortgage.

Well, that could end.

Last week, the US House of Representatives overwhelmingly passed HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limit and the upper threshold for FHA loan programs to as much as $729,750 in high-cost areas.

The temporary increase would last only until the end of 2008. The bill would also restrict Fannie Mae, Freddie Mac and the Federal Housing Administration from guaranteeing or purchasing loans above 125 percent of the median home price for a given area. That means that the existing $417,000 conforming loan limit for mortgages eligible for purchase by Fannie and Freddie would not increase in areas where the median home price is $333,600 or less.

In order to make higher limits a reality, the next step is for the Senate to pass the bill and for the President to sign it into law. The target date for final passage set by the White House and Congressional leaders is February 15. Check back here after the 15th.

Cross your fingers that this moves ahead. If it does, all of you with Jumbo loans will have an additional reason to re-finance, and save your family some money.

- Jim