Finance Friday: New HUD loan limits

The Department of Housing and Urban Development announced new loan limits effective March 5, 2008.  These limits are in response to the stimulus package that was passed in February.  The new loan limit for the Denver metro area for example, including Adams, Arapahoe, Broomfield, Denver, and Jefferson county is $406,250.  The limits are higher in the ski resort communities.  Pitkin and Summit counties have a $729,750.  For a county by county breakdown of loan limits nationwide, visit the HUD website and this link; https://entp.hud.gov/idapp/html/hicostlook.cfm.

This week was another bad week for interest rates as the spread between the mortgage backed securities and the treasury bonds hit levels not seen since 1986.  The interest rate for a 30 year fixed loan is typically about 1.50% higher than the 10 year treasury security.  The spread increased in 2007, reaching 2.25% by the end of the year. In January the rate on the 10 year treasury was close to 4.00% while the rate on a 30 year fixed mortgage was 6.25%.  Last week the 10 year treasury yield fell to 3.51% while mortgage rates rose to 6.375%, which is a spread of almost 3.00%.  The widening spread is caused by both a lack of buyers (no one wants to hold mortgages today) and banks dumping their mortgage backed securities in an effort to raise capital.

Rates for no point 30 year fixed loans today are close to 6.5%.

Guest Author Randy Kelly is a Mortgage Banker and Finance Author with Boulder West Financial Services. He can be reached on-line at http://www.boulderwest.com/.

VanEd note: Realtor.org has also put together a hard copy of the new loan limit breakdown. You can view that online or print it out by clicking here.