The two agencies buy loans from lenders, but only if those loans don't exceed a certain dollar amount. The limit is adjusted every year on Jan. 1 based on a federal study that measures changes in U.S. home prices. In seven of the last 10 years, the study prompted the agencies to raise their loan caps and each time they did, it allowed larger loans to fit into the conforming category. Because the survey showed that houses appreciated at an average clip of 5.3 percent this year, the cap will rise yet again in 2000. When you have a strong economy with real incomes going up, you have demand for housing and housing prices being bid up.
Jumbo loans are more expensive than conventional ones.
They can take advantage of the lower interest rates. Wait for the new caps to take effect Though some lenders may already be making loans for formerly jumbo amounts at conforming rates, experts say most won't until the new caps take effect. The same holds true for consumers who are just barely priced out of the market for Federal Housing Administration loans backed by the Department of Housing and Urban Development . These mortgages have looser qualifying guidelines than conventional loans, but have lower limits on how much can be borrowed. Consumers who want to wait until the new year for an FHA loan have to be a little more careful than their conventional brethren, however.