Loan rates improve for buyers above $460,000

At the end of February, it became harder to buy with a small down payment. Now, it just became easier to buy a property between about $460,000 to about $575,000. The rise in lending limits before higher “jumbo” rates kick in is a financial help to those buying in that price range. The old loan limit was $417,000. The new one is $523,750.

Here’s how the math works.

Suppose you were buying a home for $550,000 and your loan is $500,000:

Regular rate is 6.25 percent. The Jumbo rate is 7.125 percent.

Last week, you would have needed a jumbo loan at the higher rate. You’d pay $3369, plus tax and insurance. This week, you would get the lower, regular rate. That’s $3079, plus tax and insurance. That’s $90 a month less.

A typical “sales ploy” that brokers use is to tell you that $90 is not much in the scope of the purchase. However, I remind my clients that every penny counts when it comes to mortgages. An extra $10 a month for 30 years is $3,600. That $90 a month is $32,400 if you stayed in your house for the term of the loan.

If you have 10 percent down, you probably will pay mortgage insurance (PMI), which you pay for to protect the lender (some deal, huh?) Recently, the options for second mortgages for 10 percent to meet the 20 percent threshold to avoid PMI, have dried up. Check with you lender.

I am seeing a lot of buyers in the price range affected by this change. They are pleased. So am I.