Larger mortgages will cost more



(Begin VIDEO with anchor, Kristin Arnold introducing video topic)

Kristin Arnold: Borrowers taking out larger-than-average size mortgages may want to keep an eye on the calendar. Loan limits that determine the maximum FHA and conforming mortgages will reset lower effective October 1st. To explain what this means and who is impacted, we're joined by Greg McBride, senior financial analyst for

(Cut to a double screen of Kristin Arnold and Greg McBride)

Kristin Arnold: Explain the impact of lower loan limits and what that means to prospective borrowers?

Greg McBride: The majority of mortgages are government guaranteed and they carry lower interest rates. But that determination is based largely on loan size. What's happening is that maximum loan size for what falls under that umbrella is being decreased in many markets around the country. So, what's going to happen is that there are borrowers who will find themselves, later this year, having to pay a higher jumbo mortgage rate, rather than the lower conforming rate that they would get now. They may also find themselves having to put in a larger down-payment than they would have to do now. Or, having to put a lot of cash in, in order to bring their loan balance down low enough to qualify for that lower conforming rate.

One other point is that FHA loan limits are also changing. That means, fewer people buying houses with those three-and- a -half percent down payments or in the case of refinancing, fewer people being able to refinance into another FHA loan ... which means more people that would have to have more equity in the home in order to qualify. They'd either be stuck on the outside look in or have to pony up a lot of cash in order to qualify.

Kristin Arnold: This isn't just in high cost housing markets, is it?

Greg McBride: No, it's not ... at we estimate that about 61% of the US population lives in a county that will be impacted by these lower loan limits. And while the effective date isn't until October 1st, the fact is borrowers will start to see reflected in loan quotes around the beginning of August ... maybe a little sooner.

(Cut to one shot of Kristin on camera talking)

Kristin Arnold: Ok, thank you Greg for this information ... homebuyers should lock in their loan now before the limits change, and to find the lowest mortgage rates in your area, visit I'm Kristin Arnold.

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