Homebuyers To Benefit From Raised Loan Limit

Homebuyers in 2006 are likely to benefit from the hike in the loans limit, which has been raised from $359,650 to $417,000. This rise is the single largest since 1980 and is based on the average price of homes across the nation and is consistent with house price appreciation.

This loan limit rise keeping in pace with the increase in home prices across the country should help home buyers living in the more expensive cities like New York or Seattle to get a decent starter home when coupled with a good down payment.

There will be an across the board increase in loan limits for second mortgages and several other categories. For example places like Alaska get 50 percent higher limits in loans as they designated as high-cost areas. Similarly multi-family homes will also get higher loans.

* The significance of this increase will become clear when you consider that at about 6 percent interest the monthly mortgage payment for $417,000 loan will be $2,500.13. Under the old loan limit this amount would have attracted the jumbo interest rate of say 6.5 percent. The monthly payments would go up to $2,635.72 for a 30 year mortgage loan. Over 30 years you would be paying around $49,000 extra.