The Associated Press reported yesterday that included in a tax rebate deal hammered out between Congress and The White House is a provision to raise the limits on FHA loans and the mortgages that Fannie Mae and Freddie Mac may purchase. Originally it was reported that this limit would be up to $725,000 in high-cost areas, such as Southern California. Today it is being reported that the limits would be up to $730,000 for FHA loans, and 125 to 150% of an area's median home price for Fannie Mae and Freddie Mac mortgages, that would be considered conforming loans.
Conforming loan limits are considered important, because it is easier and generally there are better terms and interest rates in a conforming loan versus other types of loans, such as jumbo loans. The raising of conforming loan limits would be especially helpful in areas of high home prices, such as Southern California, making it easier for home buyers to get a good deal on a home-buying loan. Homeowners would also benefit through the ability to refinance their current mortgages, especially if their current mortgage is a jumbo loan: with the higher loan levels, homeowners could refinance their jumbo loans into a conforming loan.
The tax rebate deal, which also gives tax rebates from $300 to $1500 per person, is expected to reach President Bush's desk by February 15 of this year, according to Congressional leaders.