Jumbo LoansThis is a guest post from Jeff Hammerberg, the founder of GayRealEstate.com, the largest company in the nation representing the rights of queer home buyers and sellers. These are his words’¦

For months, real estate insiders have heard rumors that the nations biggest sources of residential loans, Fannie Mae and Freddie Mac, would soon be able to trade in the ratified market for so-called “jumbo” loans. Now the long anticipated wait is finally over, and the rumors have become a welcome and explosively lucrative opportunity. Not only are homes in the upper price range more affordable and much easier to finance than they have ever been, but the available inventory is extraordinarily and tantalizingly diverse.

Fannie Mae and Freddie Mac are federal national mortgage agencies. The twin quasi-governmental loan organizations report directly to Congress and are charged with the responsibility of maintaining smooth functioning and adequately financed mortgage markets. Their primary purpose is to ensure that Americans can always find affordable loans to help them purchase their share of the American Dream. But until March of 2008, the agencies were only permitted to underwrite and insure conventional loans, or those that did not exceed $417,000.

Once the domain of only the rich and famous, that price range can now represent nothing more than a modest house or condo in some cities, because of rampant price inflation. For many buyers in pricey regions like California, for example, securing jumbo financing was a significant and expensive obstacle in the path to home ownership. The National Association of Realtors reports that a median priced home in San Francisco, for instance, costs around $780,000. In San Jose the number jumps to a whopping $850,000 and makes New York’s median price of $525,000 look like a steal. In fact, approximately half of all the homes sold in those regions where the cost of living is especially high qualify for jumbo loans and – until now – were ineligible for much cheaper conventional financing.

Things got even worse with the implosion of the domestic lending industry due to trouble with subprime mortgages, because private investors retreated from mortgage markets en masse, spooked by the potential for catastrophic losses. The crux of the problem for the jumbo loan market was that private investment provided the exclusive source of jumbo loan funds. Without the participation of Fannie Mae or Freddie Mac, the loan money quickly dried up and the few remaining jumbos that were available became prohibitively expensive. That meant that anyone trying to buy a home worth more than $417,000 was up the creek without a paddle unless they wanted to pay outrageous premiums.

But all of that has changed for the better, thanks to the fact that the Office of Federal Housing Enterprise Oversight raised the size of loans that can be guaranteed by Freddie Mac and Fannie Mae. The new loan limits for Fannie and Freddie vary somewhat by area because they are based on local median home prices. But they rise as high as $793,750 for those taking out a mortgage to purchase in ultra-expensive Honolulu. Limits for FHA-insured loans were also boosted. They used to be capped at $362,790, but now mortgages up to $729,750 can qualify for FHA insurance. The new loan limits affect 71 metropolitan areas, as well as 21 counties that lie on the outskirts of those major cities.

Because of a recent lack of jumbo mortgage financing, homes priced between $450,000 and $850,000 have offered the best bargains of all, even during this historically exciting buyer’s market. That’s because despite the attractive prices and alluring potential for built-in equity when the market rebounds, no decent financing was available. Without mortgages, few buyers – including professional investors – can afford to pay cold cash for a home worth half a million bucks. So the most lucrative and value-laden real estate assets have been languishing on the market, waiting for buyers to figure out how to come up with the money.

Of course the news does not just favor buyers, because those home sellers asking high prices can now look forward to an increased demand with better sales price support. Take, for instance, South Florida’s condo market, where about 75 percent or more of the high-end condo properties now qualify for conventional FHA-compliant mortgages. The sudden shift in market dynamics happened overnight with the change in government mortgage guidelines. Those who had the foresight to buy earlier this year woke up to higher equity that automatically and effortlessly landed in their laps.

Today’s headlines are consumed with doom and gloom, but the sensationalism overshadows the fact that great buys are available, in all price ranges, including homes in the most desirable locations in the USA. All of these new limits lower the borrowing costs of consumers and will stay in effect through the end of the year, making 2008 one of the best times in recent history to buy or sell a higher priced home. After that time they will be reviewed, and will hopefully be extended.

To get competitive quotes on mortgage rates and expert help with all your real estate needs contact www.GayRealEstate.com and www.GayMortgageLoans.com. Or call toll free at 1-888-420-MOVE (6683). The professionals in these global networks are dedicated to services to the GLBT community.

More about Jeffery Hammerberg
Jeffery Hammerberg is Founder and President of Gay Real Estate, Inc. – the nation’s largest group of companies connecting gay & lesbian home buyers and sellers to gay, lesbian and gay friendly real estate agents. Since 1997, Hammerberg has created a virtual real estate marketplace for the LGBT community.