Pasadena Real Estate Blog

San Francisco Chronicle 

In the past week, jumbo conforming loans have become almost as affordable as standard conforming loans thanks to higher loan limits and a drop in bank interest rates. That’s good news for high-cost markets and homeowners with equity in their homes who may be able to refinance to a lower-cost standard conforming rate. However, borrowers still face tightened lending requirements.

Keep this in mind…
• Last week, a 30-year fixed-rate jumbo conforming loan with no points averaged 6.125 percent, compared with 5.875 percent for a standard conforming and 6.75 percent for a regular jumbo loan. Jumbo conforming loans are used for home purchases between $417,000 and $729,750, while standard conforming loans apply to homes with a purchase price below $417,000. Conforming loans are those that meet certain underwriting criteria and can be guaranteed by Fannie Mae and Freddie Mac. A lower rate could save borrowers several hundred dollars a month in mortgage costs.

• Both Fannie Mae and Freddie Mac require jumbo loan borrowers to make a higher downpayment (in the 10 percent to 15 percent range); require higher credit scores; provide income documentation; and typically have lower debt-to-income ratios than standard conforming loans.

• Congress recently increased the maximum loan amount to 125 percent of an area’s median home price up to $729,750. The new higher rates were intended to more accurately reflect home prices in high-cost markets and to stimulate housing market activity by allowing lenders to package more loans for sale to Fannie Mae and Freddie Mac.

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http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/13/BUBV10L0PG.DTL