In what's at least a year-long reprieve from some higher housing costs, President Obama recently signed legislation that comes with a provision to extend the current high-cost-area conforming loan limit through 2011.

The provision means homebuyers and homeowners in expensive housing markets will continue to get a break on interest rates when they buy or refinance.

Conforming loans come with cheaper rates than non-conforming or so called "jumbo" mortgages, because they are backed by the government.

On October 26, Erate.com reported the average rate for 30-year, non-conforming jumbo loans
came in at an average 5.14 percent. Meanwhile, conforming loan rates averaged 4.45 percent.

Now that the federal homebuyer tax credit has expired, cheaper rates are crucial to the housing recovery.

Federal lawmakers recently voted to keep the maximum size of loans guaranteed by Fannie Mae and Freddie Mac and the Federal Housing Administration (FHA), for high-cost areas, at the current $729,750 level.

Real estate agents, mortgage bankers, homebuilders, and others, arguing the housing market would suffer with lower conforming limits, lobbied to keep the upper limit in high-priced markets.

The limit applies to areas that include California and New York. Alaska, Hawaii, Guam and the U.S. Virgin Islands get even higher conforming loan levels.

Without the change, the limits would have fallen to about $625,000. The limit was $417,000 before 2008 and remains at that level for most of the country.

"CAR applauds our congressional representatives for their actions to extend the higher loan limits through 2011," said CAR President Steve Goddard.

"Without the extension of the higher loan limits, many California borrowers would have a harder time refinancing homes and obtaining financing for new home purchases," he said.

Many homeowners carry jumbo mortgages with interest rates in the mid to high 6s. Current conforming mortgages area available for much less to qualified homeowners who pay the standard .07 to 1 point origination fee.

If these homeowners had to refinance to a true jumbo loan of the past, they would be doing so at fixed rates in the low 5's. Even some homeowners burdened with two loans to avoid jumbo mortgage rates could benefit from refinancing both loans to today’s jumbo conforming fixed rate loan.

While borrowers must still qualify under the stiff current guidelines in today's market numerous borrowers are able to refinance to a conventional conforming jumbo loan for less, depending on their area.

Published: November 11, 2010

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.