Capstone Mtg Co. Blog

A conforming loan amount usually has a lower interest rate than a jumbo loan amount. Why? Conforming residential loans are backed by the U.S. Government; whereas jumbo residential loans are not backed by the U.S. Government. Investors of jumbo mortgage loans consider these loans to be riskier and therefore require a higher rate of return (i.e. a higher interest rate).

Fannie Mae and Freddie Mac have recently announced their 2009 conforming residential loan limits. The new limits vary according to populous geographic areas or Metropolitan Statistical Area (MSA). FYI - in the U.S.A. there are 280 MSA's. 

In Connecticut, the MSA that covers most of Fairfield County was assigned a 2009 conforming loan limit of $511K. The remainder of Connecticut continues to have the $417K conforming loan limit; in these areas, anything above $417K is considered a jumbo loan.

On the surface, it looks like Fairfield County residents may benefit from the new 2009 loan limit. However, Fannie and Freddie may throw us a curve ball like they did in 2008. Last year, the conforming loan limit for Fairfield County was $708K; but anything above $417K had "rate add-ons". At the end of the day, these "rate add-ons" created a rate that was equal to the regular jumbo rate. Preliminary indications are that Fannie and Freddie, will not implement "rate add-ons" for 2009. 

FYI - as of early December 2008, Fannie and Freddie are not yet accepting rate locks for the new loan limits (i.e. $417K to $511K). 

What's my advice for Connecticut homeowners thinking of refinancing? 

1. If I lived in Fairfield County and my loan amount was between $417K and $511K, then I would wait to refinance until I'm able to lock in a rate.
2. If I lived outside Fairfield County, then I would apply for a refinance (assuming it made economic sense)
3. If I lived in Fairfield County and my loan amount was less than $417K OR greater than $511K, then I would apply for a refinance (assuming it made economic sense)

If you have any questions, please contact Tim Malburg, President, Capstone Mortgage Company at 203-834-6293 or TWM41@aol.com