That's part of the proposed Economic Stimulus package, and it would make it easier to buy or refinance a home in the Bay Area, since prices are so high.
Sixty-two percent of Bay Area homeowners have a jumbo loan according to First American Corelogic, they track loan performance That means, their mortgage is more than $417,000 dollars. it also means a higher interest rate.
Why? Because jumbo loans carry more risk, and the on-going credit crisis, jumbo loans are now harder to get.
Leon Huntting is the former president of the California Association of Mortgage Brokers.
"There is no liquidity in the state of California right now for jumbo loans. We need those if we are going to stimulate the market if we are going to keep prices up and keep people buying homes. People want to buy homes, but they can't because there is no loan available for them," said Huntiting.
Taj Cox from Antioch has been waiting for the right moment to buy a home.
"Just to be able to qualify for a loan, you have to have the right income, the right credit scores," said Taj Cox.
Congress hopes to help.
As part of the Federal Stimulus Package lawmakers want to increase the conforming loan limits from $417,000 dollars to nearly $730,000 dollars. Anything higher would be considered a jumbo loan; conforming loans are government sponsored.
Right now the interest rates on conforming loans can be a quarter or half a point cheaper than a so called jumbo loan.
"It's going to open the floodgates for potential homebuyers. What is going to happen is with the rates going lower and the prices getting lower it's the perfect storm," said RE/MAX realtor Duane Newberry.
The monthly payments on a $600,000 thousand dollar loan with a six- percent interest rate would be $3,000 dollars, $2,750 if the interest rate were 5.5-percent and $2,500 dollars if you get a loan at five-percent.
This change in the conforming loan limits is temporary, it's only for 2008. Anything permanent could backfire and hurt the mortgage lending industry.
The proposal is expected to be on the President's desk by mid-February, and for those planning on refinancing their home now, Leon Huntting says wait until after the measure passes.
"2008 is going to be a great year for realtors and the market and the people out there who couldn't afford before and can afford now," said Huntting.
