Since Fannie Mae and Freddie Mac dominate the market, they have a major hand in setting mortgage rates. Specifically, they determine the ceilings for what they consider to be conforming loans. Because Fannie Mae and Freddie Mac only buy conforming loans to repackage into the secondary market, the demand for larger loans is far less. As a result, these jumbo loans typically have a higher interest rate.
Each year the conforming loan limits are raised, reflecting the rise in the median cost of housing in the US. For 2006, in the contiguous 48 states, the new cut off has been set at $417,000 for a single unit home. Fanny Mae predicts that nearly half a million additional homeowners can now save on their mortgages with the redefined loan ceiling. This is more than good news for new home buyers. This is a great opportunity to see how much interest you can now save by consolidating previously borrowed “piggy back” or home equity loans.
