FRIDAY, NOVEMBER 18, 2011
* Move designed to help more buyers get FHA-backed mortgages
President Obama on Friday signed a bill that allows the Federal Housing Administration to back mortgages of up to $729,500, six weeks after the limit dropped to $625,500. The move makes it easier for more buyers to get low-interest FHA loans.
But loans backed by the government entities Fannie Mae and Freddie Mac will continue to have a $625,500 limit, making them less useful in high-priced housing markets like North Jersey.
Loans that exceed the Fannie, Freddie and FHA limits are considered “jumbo” mortgages, which typically carry higher interest rates and require 20 percent (or higher) down payments.
The FHA allows lower down payments and is more forgiving of imperfect credit. But FHA loans also carry higher fees, so more-affluent buyers tend to prefer Fannie and Freddie loans, when they qualify for them.
Keith Gumbinger, a vice president with HSH.com, a Pompton Plains company that tracks the mortgage market, said high-end buyers who can’t qualify for a Freddie or Fannie loan will have to figure out which is the better deal: a jumbo loan or an FHA loan.
Jumbo loans were recently going for about 4.7 percent, while FHA loans were around 4 percent, Gumbinger said. But the FHA loans require a 1 percent upfront fee, plus about 1 percent a year in insurance fees.
Posted at NorthJersey.com