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Conventional mortgage loan limits rise

The jumbo mortgage just got bigger.

As of Jan. 1, 2002, Fannie Mae and Freddie Mac increased the single-family mortgage limit to $300,700 from the 2001 limit of $275,000. Mortgages above $300,700 are considered jumbo loans, which usually have slightly higher interest rates.

The change means that house buyers will be able to get bigger houses than before without paying the higher jumbo rate. The change benefits shoppers who are considering buying a single-family house and taking out a mortgage in the $275,000 to $300,500 price range.

Fannie Mae and Freddie Mac are companies that buy bundles of mortgages from lenders, then sell the debt packages to investors. For this to work, Fannie and Freddie standardize mortgage-lending practices. Loans that meet all the standards are called conforming loans. Maximum loan size is one of the standards.

Anything above the Fannie and Freddie limit on maximum loan sizes is considered a jumbo mortgage. Jumbo mortgages carry higher rates than conforming loans because Fannie and Freddie won't guarantee them.

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The two government-chartered companies adjust the single-family mortgage limit annually, based on the change in the average home price as calculated by the Federal Housing Finance Board.

The change saves money for some people who buy expensive houses. In mid-December, Bankrate.com's nationwide survey of large lenders showed that a typical rate for a conforming, 30-year mortgage was 7.05 percent; for jumbo mortgages, the rate was 7.39 percent.

Consider how those rates would affect someone getting a $300,000 mortgage. In 2001, that was a jumbo mortgage; in 2002 it isn't. At 7.05 percent, the principal and interest on a $300,000 mortgage would cost $2,006 a month; at 7.39 percent it would cost $2,075 a month, a difference of $828 a year or $24,840 over 30 years.

For families buying houses in that price range, the nearly $25,000 in savings over 30 years is enough to buy a Viking 48-inch gas range and 36-inch oven, and a Sub-Zero side-by-side stainless-steel refrigerator-freezer, with enough left over to splurge on a Fujitsu 42-inch plasma-screen television!

The limit of $300,700 applies to houses in the continental United States. The limit will be $451,050 in Alaska, Hawaii and the U.S. Virgin Islands.

Limits for multi-family homes in the continental United States will increase, too:

  • Two-family residences: $384,900;
  • Three-family: $465,200;
  • Four-family: $578,150.

Limits are 50 percent higher in Alaska, Hawaii and the Virgin Islands.

-- Updated: Jan. 2, 2002
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National Mortgage Rates
OVERNIGHT AVERAGES
Rates may include points.
30 yr fixed mtg 3.95%
15 yr fixed mtg 3.08%
5/1 jumbo ARM 3.17%



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