Buying this year? The news isn’t all bad

Will 2006 be a better year than 2005 to buy a home?

The good news is that you will be able to borrow more money at the best possible rate. The bad news is that interest rates are not expected to decline and, while home values might not continue their sizzling pace, don’t plan on them moving backward.

Some home loan borrowers had been eyeing 2006 so that they could take advantage of the new conventional loan “ceilings” adopted by the two key players in the secondary mortgage market. For many, that’s better news than lower mortgage interest rates. With home prices rising, the equity you will accrue in appreciation will far outdistance the difference you will receive if mortgage interest rates go down.

On January 1, Freddie Mac and Fannie Mae, the two biggest players in the secondary mortgage market, expanded their loan limit for single-family mortgages to $417,000 from $359,650, including reverse mortgages made under the Fannie Mae Home Keeper program. The move enables potential home buyers and refinancers to borrow more money at lower interest rates. Amounts greater than $417,000 are classified as “jumbo” loans that typically carry a slightly higher interest rate.

Conforming loan limits usually adjust annually and are based on the October-to-October changes in the average home price as published by the Federal Housing Finance Board. Both new and existing homes are included in the survey.

The new loan limits means that more people will be eligible for conforming loans. As a result of the new loan limits, Fannie Mae estimates that as many as an additional 466,326 homeowners would be eligible for conforming loans. Fannie Mae’s average loan amount was approximately $172,000 in 2005.

Also effective January 1:

• $533,850 for mortgages on two-family properties, or duplexes (up from $460,400);

• $645,300 for mortgages on three-family properties, or triplexes (up from $556,500), and

• $801,950 for mortgages on four-family properties, or four-plexes (up from $691,600).

The Federal Housing Administration also increased its loan limits for 2006. FHA lifted its ceilings to $362,790 from $312,896 in about 30 urban areas. The FHA “floor” in 2006, or the maximum loan amount in most areas, moved from $172,632 to $200,160. Those numbers also apply for the FHA-insured reverse mortgage, commonly known as the Home Equity Conversion Mortgage.

Approximately 80 percent of U.S. counties are at the lowest FHA loan limit, including Spokane and Kootenai counties. Lending limits for other counties can be found online at https://entp.hud.gov/idapp/html/ hicostlook.cfm.