What will the Economic Stimulus Package due for you?

On February 13th, President Bush signed the Economic Stimulus Bill into law.  There has been a lot of confusion as to the details with the most critical question what will the new conforming loan amount be?

A conforming loan amount is simply the amount of money that a bank will lend you at lower interest rates.  Currently, this amount is set at $417,000.  So… if you were to buy a home for $600,000 and put 20% as down payment ($120,000), you would need to get a “non-conforming” loan or what the banks call a jumbo loan of $480,000.

The reason there’s confusion on this package is because all the details have not been finalized yet.  HUD has 30 days to provide certain information like median area home prices, MSAs and mortgage principal obligation limits after the bill becomes law.

For the most part, we can expect that the maximum conforming loan limits will be the higher of the $417,000 or 125% of the area median home price, not to exceed $729,750 for Fannie Mae and Freddie Mac loans.

This is great news for Pasadena and San Marino home buyers and home sellers.  The median price for Pasadena (91103 and 91104 zip codes) homes as of December of 2007 was $680,000 as reported by www.dqnews.comSan Marino home sales median for the end of 2007 was at $1,380,000, again as reported by DQNews.

This means that if you are considering purchasing a median priced home in Pasadena with 20% down ($136,000), you’d be able to get a conforming home loan for $544,000.  This will afford you a better interest rate (at least a 1 point differential) and in many instances avoid a buyer getting a 2nd loan on the property. 

Stay tuned for more updates as details become available.

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