Homebuyers in High-Priced Markets Could Get Relief

[Feb 12, 2008.]

 

Prospective homebuyers in high-priced real estate markets could receive some additional relief, courtesy of the federal government.

The stimulus package recently approved by Congress and signed by President Bush raises the limit on something known as conforming loans.  These are loans which the mortgage giants known as Fannie Mae and Freddie Mac are permitted to purchase.  The limit would rise from $417,000 to a new point based on 125% of the area’s median home price up to $729,750.  Meanwhile, Federal Housing Administration loans, which are designed for low-income homebuyers, would increase as well to 125% of the area’s median home price.

In addition, under the plan, homeowners with loans between $417,000 and $729,750 could refinance at a significantly lower rate.  That would save them a point in interest rates and as much as $500 each month.

The stimulus package also means that would-be buyers will be able to afford a much more expensive house.  That could help struggling home markets such as the San Francisco Bay area, where home prices are especially high.

However, some skeptics believe that the legislative plan will not have much of an effect on the current housing mess.  They note that the stimulus package would positively impact only about 20 of the 160 metropolitan areas in the nation.  It would also affect those areas for a period of only 6 months.

Still, others are looking at the stimulus package with glee.  They note that the program could trigger as many as 350,000 house sales across the nation, leading to some $44 billion in economic impact.   The positive effect may be greatest in the states of New York and California, where sky-high real estate prices are the norm.  One mortgage expert stated in a published report that the plan will permit individuals to qualify more easily for home loans, to obtain improved rates, and to save hundreds of dollars per month.