BUYERS with good credit, an adequate down payment and 2 years or more employment history will qualify for Full Documentation loans. There are new guidelines for Fannie Mae and Freddie Mac loans. More programs will become available. If the property will be your home, not a speculative investment, you should be buying for the long term. Today’s market gives buyers and sellers the opportunity to negotiate a reasonable deal for both parties.
Interest rates on jumbo 30 year fixed rate mortgages (loans in excess of $729,750) have increased substantially over the last quarter to an average rate (as of 10/1/08) of approx. 8.5% from 7.2%, and are significantly higher than 30 year fixed rate conforming loans (loans of less than $417,000) which are at approx. 6.0% (which rate decreased about .1% over the last quarter). Conforming loans (as of 10/1/08) generally require a 10% down payment (less for FHA loans)
This large spread between jumbo loans and conforming loans is amazing considering that prior to the mortgage loan melt down, spreads between conforming and jumbo loans were only approx. .2%.
Jumbo Loans – Because of this high interest rate for 30 year jumbo loans, most jumbo loans are being done for fixed rates of only 5 to 7 years, in the range of 6% (with 1 point), with a 25% to 30% down payment.
Legislation was passed creating a new “Jumbo conforming loan” category between $417,000 and $729,750, effective through 2008, however, interest rates for these have generally been fixed for 5 to 7 years and are about the same as traditional Jumbo loans.
Conforming loan limits for homes in Los Angeles County are expected to increase to approx. $625,500 for loans sold to Fannie Mae, Freddie Mac, and for FHA loans, with lenders beginning to offer conforming loans with these higher limits sometime in mid to late November (the official date for these new loan limits is January 1, 2009, but lenders will be offering these new loans prior to that due to the actual time it takes to close a loan).
The Federal Reserve Bank has recently significantly cut short-term rates, however long-term rates have remained stubbornly high due to inflationary expectations.
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