In 2008, Congress enacted emergency measures elevating the limits on conforming loan amounts to increase money available for mortgage financing. Those measures were temporary, however, and Fannie and Freddie limits reverted to their old $417,000 maximums on January 1st. But those who snoozed didn't lose, after all. The newly passed American Recovery and Reinvestment Act of 2009 grants higher limits to areas in the country designated "high cost" (in addition to Alaska, Hawaii, Guam, and the Virgin Islands, which enjoy even higher loan limits) by the Federal Housing Finance Agency (FHFA).

Are You on "The List?"

Properties that fall within the boundaries of designated "high-priced" areas are easier and cheaper to refinance than similarly priced homes outside these areas. For example, a $625,000 loan in high-priced San Francisco falls within conforming loan limits and the rate will probably be less than 5%. That same loan amount in nearby Sacramento is considered "jumbo" or "non-conforming" and a 30-year fixed rate runs over a percent higher.

Not as High as You Think: Check 2009 Figures

The 2009 FHFA list isn't a duplicate of last year's. Maximum limits are calculated at 115% of the median house price in the designated county or metropolitan area (if an area encompasses more than one county, the highest-priced county's figures are used), maxing out at $729,750. And as everyone knows by now, prices have fallen substantially in many parts of the country, even those previously thought "bulletproof" in terms of home value retention.

So an area that was on the list last year might not have made it this year--homeowners can check the list online or ask a lending professional who knows the area. Borrowers should know their limits before looking at refinance mortgage options. It won't help to shop for conforming rates when a jumbo loan is needed.

Jumbo Mortgages: Think Small to Go Big

Those with jumbo mortgages still have options. Fannie Mae, Freddie Mac, and the market for conforming loans are all about Wall Street. But little banks on Main Street have money to lend. And those that keep and service their loans (these institutions are called "portfolio" lenders) call their own shots and make their own rules. And all around the country there are brokers who specialize in ferreting out this kind of money. So homeowners who check several sources online or make a few calls in the neighborhood can probably find financing.

Finally, jumbo borrowers should probably abandon the idea of getting the best rate with a 30-year fixed rate mortgage. Hybrid ARMs like 5/1 mortgages have traditionally been a much more economical way to finance premium properties. Or for those just over the conforming loan limit, structuring a refinance with a conforming first mortgage of $417,000 and a second mortgage for the balance may be the way to go. A mortgage calculator can help homeowners discover the best way to "go big" wherever they live.

Sources

American Recovery and Reinvestment Act of 2009

OFHEO

About the Author

Gina Pogol writes for an online media company about mortgage and finance. In addition to a decade in mortgage lending, she has worked as a systems consultant for Experian and as an accountant for Deloitte. She has a BS in Financial Management from the University of Nevada.