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Date: Feb. 13, 2008
Tags: None
I'm not the only one saying it, but the Economic Stimulus Package signed today by the President has a big boost for homebuyers, homesellers and Realtors®. No, I don't mean the $300 to $1200 check that should go out to all taxpayers in May. That won't cover one month's mortgage payment in most markets. I'm referring to the temporary increases in the FHA and Conventional loan limits. According to Inmann News in cities, like Seattle, where home prices are high, FHA and Conventional loan limits will be increased to as much as $729,750. The previous limit was a max of $417,250.
What this will mean is that some of the pressure on "Jumbo" loans, which carry higher interest rate, will disappear simply because buyers won't have to use them to purchase homes in cities, like Seattle and the surrounding area, where median home prices are $450,000 and more. This will be very good news for many in the short run.
In the long run, however, watch out. Here's one scenario that might prove calamitous if left unchecked. Suppose the more affluent look to these increased loan limits with lower interest rates as a buying opportunity. So far so good, right? Maybe, but that will drive up the demand for home loans causing a possible rise in interest rates. If interest rates do rise, that will have the effect of slowing down the very real estate market it is meant to stimulate, especially for the first time buyer who tends to buy less expensive homes and isn't benefited by the increased limits. This will need to be monitored very closely. First time homebuyers account for between 35 and 40 percent of all home sales.
Nevertheless, if you're in the market for a new home and your loan would have previously fallen into the "Jumbo" category, don't wait. This is better than finding money on the street.
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