Congress Extends Jumbo Mortgage Limits Through 2011

Posted on 13. Oct, 2010 by LuxSpaces in Real Estate News

The need for government backed loans has been very important for the real estate industry, but jumbo mortgages have still been coming with a high price tag.

Congress has extended the limits for jumbo mortgages through 2011 providing some much needed stability for the United States housing market. The rates allow geographic increases of the traditional max rate for Freddie Mac and Fannie Mae loans up to $ 729,750 in the highest priced markets.

Since private equity loans have all but dried up in the capital crunch, the need for government backed loans has been very important for the real estate industry. If Freddie Mac and Fannie Mae will not buy the loans then the private market will need to. And since the cost of capital is so high, jumbo loan borrowers are paying a significantly higher interest rate.

Now with the new limits proposed by Congress, buyers that are in the market for a jumbo mortgage can qualify for the reduced mortgage rates, as low as the mid-4 percent rate for highly qualified borrowers and only need to put 3.5 percent down on an FHA loan. Otherwise these same buyers will need to put 10–20 percent down and pay a 6–8 percent mortgage rate for the same home in the private market.

Now comes the conundrum for free market folks like myself. I do not want the level of government involvement in the real estate industry to occur. But if it does have to occur, the playing field needs to be level for the market to work. All in or not at all, but let’s try to keep the market growing for all involved.

If you would like to see more articles like this, visit The Real Estate Bloggers,where it was originally published.

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Tags: Commentary, Mortgage