WASHINGTON - Higher-priced houses will be a little more affordable in the Tampa Bay area next year.
Effective Jan. 1, the so-called conforming loan limit will increase to $333,700.
The conforming loan limit, currently $322,700, is the ceiling on loans that can be purchased by Fannie Mae and Freddie Mac, the two giant government-chartered financial institutions that maintain liquidity in the mortgage market. They do that by buying mortgages from local lenders, packaging them into securities and selling them to investors worldwide.
Most higher-end borrowers have the wherewithal to go ahead with purchases whether their loans are any more expensive or not, mortgage market specialists say.
But because the interest rate on conforming loans can be 0.25 percent to 0.75 percent lower than that for "jumbo" loans that are above the Fannie-Freddie limit, monthly payments are less expensive.
According to Fannie Mae's estimate, nearly 100,000 buyers nationally could save as much as $21,900 over the life of a 30-year mortgage because of the higher loan limits that were released Tuesday.
Also on Jan. 1, the ceiling on government-insured FHA mortgages will rise to about $160,200 in the bay area and most other metropolitan areas. The FHA limit will be about $290,300 in the costliest cities, such as San Francisco.
The higher ceiling on loans insured by the Federal Housing Administration will open the housing market a little wider for thousands with slightly tarnished credit records. "It's not a question of whether someone will qualify for an FHA mortgage or not," said Jay Brinkmann, an economist with the Mortgage Bankers Association. "Rather, it means that someone who does qualify will be able to buy a more expensive house."
FHA loans are considered the financing of last resort for borrowers who don't measure up to Fannie Mae and Freddie Mac's stricter underwriting standards. Otherwise, they would be forced into the subprime market, where lenders charge rates that are often several percentage points higher.
Borrowers don't have to wait until the new year to take advantage of the increases. Some lenders said Tuesday that they are ready to accept applications at the higher limits for loans that will close in 2004.
"We'll put the new limits into effect by next week at the latest," said Gregory Sayegh, senior vice president at Washington Mutual, one of the country's largest lenders. "We do it early every year, provided the loan funds after Jan. 1."
