I thought I would share this news update with you all on some changes that will affect the loan limits, mortgage insurance premiums, and interest rates. You will see that these changes may have have an impact on you, whether you are buying a home or refinancing.

President Obama has signed into law H.R. 3081, which among other items is the authorization to extend current $729,750 temporary high-balance conforming loan limits provided through Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). This ensures that current loan limits for single-family residential mortgages will remain in place until September 30, 2011. The move to extend the higher limit will effectively keep interest rates super-low for a large swath of home buyers and borrowers with loan amounts between $625,500 and $729,750. The bill also appropriates $20 billion so that FHA can continue making loan commitments through the end of 2010.

Additionally, beginning today there will be changes in the way borrowers pay for the privilege of using low-down-payment, government-insured mortgages to buy or refinance a house. FHA will lower its upfront mortgage insurance premium from 2.25% to 1% (except for HECMs) while simultaneously increasing the annual premium from 0.55% to 0.9%, which is collected on a monthly basis. Because most borrowers choose to finance the initial fee as part of the loan amount, the net result for most people will be lower monthly payments for the first few years their loans are on the books. This change will affect purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit-qualifying streamlined refinance loans.