mortgage

4 ways stimulus helps homeowner, buyer

Higher FHA and conforming loan limits. The maximum FHA loan limit for high-cost areas has been restored to the 2008 level of $729,750.

Stimulus legislation passed by Congress in the first half of 2008 temporarily raised the FHA loan cap from $362,790 to $729,750 in cities where housing is particularly expensive. However, the higher loan limit expired in January and was replaced by a lower loan limit of $625,000.

The stimulus package restores the 2008 limits through the rest of 2009. This will help keep a greater percentage of loans in expensive cities (such as New York and San Francisco) in the "conforming loan" category.

Conforming loans are eligible for guarantees from mortgage giants Fannie Mae and Freddie Mac. Such guarantees help reduce mortgage rates on conforming loans. The guarantees also make it easier for first-time and low-income borrowers to qualify for mortgage loans.

"This could help places like California see an increase in home sales, but it is not likely to move people off the sidelines if they are still waiting for home prices to drop further," says Nicholas.

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