There have been many changes in the mortgage industry over the past few months. One of the biggest changes, and one which has the potential to save home buyers hundreds of dollars in mortgage payments, is the increase in loan limits for several different loan programs. In this article we will discuss the new loan limits for Conforming, Jumbo and FHA loans.

The new limit for Conforming loans is $300,700. Conforming loans offer the best interest rate on the market for a 30-year, fixed rate term. The new loan limit allows borrowers to finance up to $300,700 and qualify for the market"s most favorable rates. This new loan limit also applies to adjustable rate mortgages. Conforming loans are primarily purchased by FNMA and FREDDIE MAC, so borrowers using this type of financing will need to have a credit score of 620 or higher and meet other specific criteria. The interest rate for a Conforming loan is generally about .5% less than the rate for a Jumbo loan.

How do buyers benefit from the higher loan limit? Simply stated, buyers can now purchase a home in the $300,000 range and pay a lower interest rate. For some, this means a savings of $300 a month or more. Lenders have specific minimum credit scores for pricing. If you are concerned about your credit, please speak with your lender. Do not allow multiple lenders to pull credit reports on your behalf as this can impact your credit score.

Believe it or not, each lender inquiry can reduce your overall credit score. Do you need to borrow more than $300,700? The new limit for Jumbo loans is $650,000. A Jumbo loan is for home buyers who must finance $300,701 to $650,000. Jumbo loans usually require more money down and have a higher interest rate-about .5% higher than conforming loans.

Loan amounts over $650,000 to $1,000,000 are typically subject to even higher interest rates. Fewer Wall Street investors are willing to purchase these larger loans, so borrowers will usually pay a higher rate and be required to put additional money down on the property. Rates for loans that exceed current Jumbo limits vary and are usually priced with lock departments. If you are interested in rates for loan amounts in this range you will need to call your lender for a quote. These prices are generally not advertised in the going rates. Borrowers requiring this type of loan will need to have better than average credit to qualify for the best pricing on the market.

More good news for home buyers: Loan limits for FHA (Federal Housing Administration) loans have also been increased. Maximum loan amounts for FHA loans vary based on location. Instead of issuing a single maximum loan amount, FHA issues a maximum loan amount for each county in the state. FHA loans are wonderful and offer the highest property standards to uphold. Best of all, they only require a 3% down payment.

In the past, FHA loans were not an option for many borrowers because the home they planned to purchase exceeded the maximum loan amount. The new loan limits will make FHA financing an option for many home buyers. Your lender can provide information on the new FHA loan limits for each California county.

Increased loan limits for Conforming, Jumbo, and FHA loans reflect the rise in home prices many regions have seen in the past 12 months. If buying a new home is one of your resolutions for 2002, you might discover that the higher loan limits translate to savings on your monthly mortgage payment. Call your lender today to find out if the recent changes in loan limits will benefit you.