About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
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There was an interesting article in the Seattle PI recently on how some people are using the newly increased FHA loan limits as an alternative to traditional loan over $417,000, or “jumbo loans”. The issue is that over $417,000 the rates have become quite high — higher that FHA rates. In some high cost areas FHA loan limits exceed $700,000 so in those places FHA is an interesting alternative to conventional loans. Here is an excerpt from the article:

He could use the FHA for his $444,000 loan thanks to February’s federal stimulus package, which temporarily raised the agency’s cap from $362,790 to $567,500 in King County. The new limit also applied to conforming loans, which go to borrowers with better credit and bigger down payments, are backed by federally sponsored mortgage giants Fannie Mae and Freddie Mac, and had been capped at $417,000.

The new, bigger FHA loans have started catching on in recent months in the Seattle area and elsewhere, according to local lenders. But generally borrowers have avoided the larger conforming loans because, at first, they imposed much higher interest rates and extra restrictions.

“It was just, in my opinion, a really big flop,” said David Hatlen, vice president of Home Street Bank.

But terms for these conforming jumbo loans have improved just in the past few weeks.

“It’s a great program now,” Hatlen said. “The problem is, a lot of people don’t know about it.”

The FHA announced last week that, from October through May, it insured 2,658 loans in the Seattle area and 11,924 statewide — up 78 percent and 50 percent, respectively, from the entire 2007 fiscal year, which ended Sept. 31, and more than any of the previous three fiscal years.

But only a small part of this was due to the higher-limit loans, which carry interest rates about half a percentage point higher than traditional FHA mortgages, according to local lenders.

“I don’t think the word’s out on the FHA jumbo (loans) yet,” Hatlen said.

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