Beginning on October 1, the Federal Housing Administration, as well as mortgage-backing government-controlled businesses Fannie Mae and Freddie Mac, will cut the maximum size of the home loans they guarantee to $625,500, down considerably from the current limit of $729,750, according to a report from the Bergen Record. The difference will be considerable, as government-supported home loans allow for down payments of as little as 3.5 percent and markedly lower interest rates, while those that exceed the limit – sometimes referred to as “jumbo” loans – require down payments of 20 percent or more and usually have far higher interest rates.
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However, some experts believe the change won’t be especially harmful to the mortgage market, the report said. Often, consumers buying homes of that size can afford to pay more for their properties and interest rates because they are not first-time home buyers.
But there are others who believe that, given the amount of problems the housing market currently has, any changes that will make it more difficult for any consumers to purchase homes will be problematic, according to a report in the San Jose Mercury News.
“It’s the right policy in the long run but the wrong time to do this,” said Ken Rosen, chairman of real estate market research firm Rosen Consulting Group, told the newspaper.
[Resource: The Ultimate Guide to Underwater Mortgages]
Image: Tahir Hashmi, via Flickr.com