HOW IT PLAYS OUT IN PRACTICE

 

Unfortunately, the new loan rates everyone has been talking about will not be as good as first originally thought.  However, they ARE a help and certainly better than nothing.  The new conforming loan rates for Nevada County are between $500,000 and $599,999.  The variation IS determined where a property is located in the county.  

 

Let’s say that a loan is needed to buy a $700,000 house in Truckee.  With 20% down, the first loan would be in the amount of $560,000.  The loan rate would be split between $417,000 (the old conforming maximum) and that amount above that old conforming amount.  The first tier, or $417,000 would be at say 6% while the second tear or $147,000 would be at say 7%   If the two interest rates are combined the actual rate would be would be at say 6.3%.  If a loan were to go over the new conforming maximum loan, there would be another tier and an additional rate.

 

There are FHA loan guarantees available for real estate loans now, but up until now they have been so low that there were very few being used.  FHA has raised these guaranteed limits to 125% of the areas median price.  This will have the affect of allowing some people to refinance their homes with a more favorable loan.

 

It remains to be seen how long it will take for these new loan provisions to be implemented and what the net effect of them will be.