Thursday, March 6, 2008
Not to be confused with...
So while we still wait to hear about our co-op interview date we found out from our mortgage broker that the federal government is going to be changing the conforming limits of mortgage loans.
Your probably asking yourself what a conforming loan is and why this is important to know.
I’ll try and prevent this one from making your head explode.
Basically, there are two types of home loans: Conforming, and Jumbo. They are defined by the amount for which your loan is for. A loan is ‘conforming’ when it conforms to national standards and guidelines. They are secured by government sponsored entities such as Fannie Mae and Freddie Mac. (I don’t know if Fannie is related to Sallie Mae, who gave me my student loans).
Conforming loans are much simpler, and typically come with a lower interest rate. As of 2006, the limit within the continental United States for a conforming loan was $417,000.
Of course anyone living in New York knows that if you want an apartment bigger than a closet, then you’ll probably be paying more than $417,000. Which means you’d probably have a jumbo mortgage.
A jumbo mortgage is a mortgage with a loan above the national standard and are not funded by government sponsored entities. Because of this, they carry more risk, and usually incur a higher interest rate and additional underwriting requirements.
For most New Yorkers, (and in the current situation, us) this is just one of those things you’ll have to eat, unless you have extra money to put down a larger down payment to lower the overall amount of your mortgage. That or you’re willing to move to an area with lower property values.
But now that might change. . In February, Bush signed an economic stimulus package that temporarily increases the conforming limit to $729,750 until at least December 31 of this year. Next week congress will meet to make this an official law. This is huge and great news for us as (while I’m not telling you our loan amount), we should now most certainly fall under the new limits and have ourselves a beautiful conforming loan. This could mean a savings of hundreds of dollars each month.