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Federal housing agency Fannie Mae is raising the conforming loan limit for single family homes from $359,650 to $417,000, an increase of $57,350. While Fannie Mae will make this effective in January 2006, Loans, the nation's largest online lender, is implementing the new limit beginning this Friday, December 2, 2005. Each January, housing agencies Freddie Mac and Fannie Mae adjust the conforming loan limit based on the average home price appreciation from October to October of the previous year. The Office of Federal Housing Enterprise Oversight (OFHEO) calculates the average price appreciation for homes in the lower 48 states, which this year is expected to be approximately 15.9 percent. "The $57,350 increase in the single-family loan amount will allow more homebuyers to qualify for lower-rate conventional mortgages," said Bob Walters, Chief Economist for Loans (www.loans.com). In fact, Fannie Mae estimates that as many as 466,326 additional homeowners will qualify for a conforming loan in 2006. Because they are guaranteed by Fannie Mae and Freddie Mac, conforming loans carry interest rates that are as much as ½ percent lower than non-conforming "jumbo" loans. At current rates, the new loan limit can save homeowners a significant amount over the life of a 15 or 30-year fixed rate mortgage. Walters offers homeowners and home buyers the following tips to help them take advantage of the new conforming limits: - Existing Homeowners: Homeowners currently in non-conforming (jumbo) loans between $359,650 and $417,000 may be able to refinance their jumbo loan to a conventional loan to take advantage of a lower convention interest rate. They could lower their monthly payment as well as interest paid out over the life of the loan.
- Prospective Home Buyers: Home buyers looking at mortgage loans ranging between $359,650 and $417,000 will be able to obtain lower conventional interest rates as a result of this action. This means they can afford to buy more home for the same payment.
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