Monday, March 31, 2008

Stimulus package and jumbo loans

If you haven't been reading the news lately, here's what you missed. The stimulus package that became law on February 13th, which is giving poorer taxpayers rebate checks up to $600, also increased the mortgage amounts that Fannie Mae and Freddie Mac could buy. A conforming loan is a loan less than $417,000, and Fannie and Freddie can't buy these big loans. A non-conforming, or jumbo loan, is a loan greater than $417,000, and Fannie and Freddie can buy these smaller loans. Typically, jumbo loans have higher rates than conforming loans because Fannie and Freddie can't buy them, thus decreasing the market for them. The new law was intended to drop rates on jumbo loans, because now Fannie and Freddie could buy these larger loans. But it hasn't really worked out this way.

So here's the news, it won't apply to co-ops, and it will only allow a loan-to-value ratio of 75%, and you'll have to pay 2-3 points, and you can't do a cash-out refinancing. Doesn't sound to stimulating, huh?

No comments: