Mortgage rates vary according to whether the mortgage is considered to be "conforming" or a "jumbo" and jumbo mortgages can carry interest rates that are higher by half a percent or more. So, if you are shopping for a new home, or a new mortgage, it is important to be aware of the jumbo loan limits and to try to stay under them.
The Federal Housing Finance Agency determines the limits for conforming loans and that limit was $417,000 in 2010. However, in 2008, as part of the economic stimulus package, this limit could be raised for certain high-cost areas. The highest permitted limit was extended at that time to $729,750. This limit was in place in very expensive cities in New York, California and Washington DC. In Massachusetts, the following counties were eligible for higher limits:
Barnstable County: $462,500
Bristol County: $475,000
Dukes County: $729,750
Essex County: $523,750
Middlesex County: $523,750
Norfolk County: $523,750
Plymouth County: $523,750
Suffolk County: $523,750
(All other counties in Massachusetts are capped at the national $417,000 limit.)
These limits define the maximum loan amount which may be purchased by regulated agencies, such as Fannie Mae and Freddie Mac. Loans larger than these limits may not be sold to the agencies.
Effective next year, the highest amount permitted even in the highest cost regions will drop to $625,500. So, if you are considering the purchase of new home that will require a jumbo mortgage, it might make sense to complete that purchase before the end of this year. After this year, rates for jumbo mortgages are expected to be considerably higher.