Jumbo mortgages-Need to worry

For some of the home buyers the time is good. The home prices are down by 10 % or more and at the same time the interest rates are also down to the lowest percentage in the last four years. This is applicable to the borrowers of mortgage of $417,000 or less. But, what about the borrowers of the jumbo mortgages or mortgages worth more than $417,000?

Jumbo mortgages are not purchased by federal mortgage guarantors Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500). Now in this condition of foreclosure and related problems, investors are not interested in buying bonds created from bundles of jumbos or from any such non guaranteed mortgage type. Banks are cutting on lending of jumbo mortgages. The rates have been hiked and the standards have been tightened.

You will have an idea of the situation from the following data -

If you can pay 20% down payment, then you can get a mortgage of $417,000 or less at an interest rate of 5.9% for 30 years. But for jumbo mortgages of 30 years you will have to pay upwards of 7%.

But if you are seeking a small jumbo, then there is a good news for you. Congress has proposed some benefits for the small jumbo mortgage seekers. It is part of the economic stimulus deal, where President Bush has proposed to raise the limit of Fannie and Freddie mortgages from $417,000 to $625,000 or $730,000. The legislation has not been approved by the Senate yet, but will be discussed soon.