Your IRS rebate check from the economic stimulus legislation won't be arriving until sometime in May, but the stimulus plan's new super-sized jumbo loans for buyers in high-cost housing markets have just begun hitting the marketplace.
Depending on the location of the property you want to buy or refinance, you can get an FHA-insured mortgage for as much as $729,750 with a 3 percent down payment. You can also apply for loans designated for funding by Fannie Mae and Freddie Mac up to that amount -- or 125 percent of your area's median home price -- but with larger down payments of at least 10 percent.
The new jumbos are intended to break up a logjam in the capital markets: Last August, global investors began bailing out of American mortgage bonds as fears about losses and write-downs spread from the subprime sector into other home-loan categories. Jumbo loans traditionally were viewed as slightly higher risk than the "conforming" loans up to $417,000 that were bought and securitized by congressionally chartered Fannie Mae and Freddie Mac.
But as the capital markets seized up, money for jumbos virtually disappeared. Interest rates soared to 9 percent and 10 percent in some cases -- causing problems for buyers and refinancers in California, New England, the mid-Atlantic states and parts of Florida, where high home prices require giant mortgage money.
To free up the flow of capital in these areas -- and to help financially stressed owners find affordable fixed-rate refinancings -- the stimulus legislation authorized new jumbo programs through Fannie Mae, Freddie Mac and the Federal Housing Administration through Dec. 31.
Without congressional action, the limits will drop back to $417,000 for Fannie and Freddie, and to $362,790 for FHA, beginning New Year's Day. In the meantime, there should be plenty of jumbo mortgage money available to anyone who can afford it.
But don't expect eligibility standards to be as generous as you can find in the under-$417,000 segment of the market. For example, in the guidelines for what Fannie Mae calls its new "jumbo conforming" program, the company will, beginning April 1, purchase fixed-rate mortgages up to $729,750, but only with the following conditions:
Minimum down payment of 10 percent.
Minimum FICO credit score of 700 for any loan with less than a 20 percent down payment. "Nontraditional" credit histories as alternatives to FICOs are not permitted as in other programs.
