House is right about home ownership

Anyone in the market for a house in California or any other expensive market might want to keep tabs on HR 1461.

That's the Housing Finance Reform Act of 2005, and if it passes with a key provision in place, it could save home buyers money when it comes to getting loans for properties meeting Freddie Mac and Fannie Mae conforming loan limits. This is the House of Representatives' version of sweeping legislation that would overhaul federal oversight of the two mortgage giants.

The California Association of Mortgage Brokers thinks it's a good idea and recently attended a hearing in Sacramento to voice support for Assemblyman Mark Ridley-Thomas' AJR 47.

This is a joint resolution of the state Assembly and Senate that urges the president and Congress to recognize the high cost of buying a home in California.

Ridley-Thomas, in an interview Friday, notes that California lags the national average in homeownership so something needs to be done.

"If we want more people to experience homeownership, we need to take the steps that are practical to facilitate that outcome," he said.

He's right.

For years, California residents have been shortchanged when it comes to obtaining mortgages guaranteed by Fannie Mae and Freddie Mac.

Each year the two mortgage companies set their conforming loan limits based on the October-to-October changes in the average home price computed by the Federal Housing Finance Board.
This year it is $417,000.

In February, the median single-family home price in California was $535,470. In Los Angeles County, it was $565,600, according to the California Association of Realtors. Only five of 22 major markets tracked by the group were under the new loan limit.

Fannie Mae, in a new release last year, said its average loan size for single-family properties in the first three quarters of 2005 was about $172,000. That seems to put the Golden State at a disadvantage.

Borrow money from a Fannie or Freddie affiliated lender up to that the conforming amount and you get a pretty good interest rate. If you have to stretch above that in places where homes are expensive you may need a jumbo loan, which cost more.

Jumbo's typically carry a quarter to a half point more in interest that a traditional loan.

Gregory J. Wilcox, Staff writer

Is it Time For You to SwitchTo a Fixed-Rate Mortgage?

More than $2 trillion of adjustable-rate mortgages come up for interest-rate resets in 2006 and 2007, according to Moody's Economy.com. For homeowners who want to refinance to a fixed-rate loan, the timing couldn't be worse -- the average rate for 30-year fixed rate mortgages is at the highest level since 2003.

WHAT TO DO: If the rate on your ARM is about to move higher and you have no plans to move in the next five to seven years, locking in a fixed-rate mortgage may make sense. To find out how much more you'd pay refinancing to a fixed-rate loan, click here. Comparison shop for fixed-rate loans here. If you plan to move soon, don't bother refinancing -- it's likely you wouldn't recoup your closing costs. For borrowers with hybrid mortgages, which combine a fixed-rate and an adjustable-rate loan, the decision to refinance or wait until the fixed-rate period ends depends on whether likely rates will continue to rise, or whether we're nearing the end of the current round of rate increases, as some economists predict.

By Terri Cullen From The Wall Street Journal Online