Triple Treat for Home Buyers

This time next year, more Californians may find themselves celebrating the holidays in homes that they own. Buying a home will become more affordable for middle- and low-income families beginning Jan. 1, thanks to a sort of home buyer’s harmonic convergence: federal approval of an increase in loan limits, low mortgage rates and more programs designed for first-time buyers.

That’s good news for communities because residents who own homes tend to be more involved in the safety, maintenance and issues of their neighborhoods. In the sprawl of Southern California, a sense of community is too often lost, too often longed for.

Increases in loan limits may be the most significant change. The cost of real estate in California typically runs above the national average home price. Thus home buyers in the state are at a disadvantage when it comes to so-called conforming loans, whose interest rates are less than for jumbo mortgages. Lenders can sell conforming loans to Fannie Mae and Freddie Mac, the two federally chartered corporations that package mortgages into securities for resale on Wall Street.

On Jan. 1, the limit on conforming loans will go up to $227,150 from the current $214,600, following a boost from $207,000 in 1996. That mean rates on these loans are generally one-quarter to one-half of a percentage point cheaper for borrowers who are good credit risks than the rates on loans above the limit.

The Federal Housing Authority helps would-be buyers who cannot qualify for any other loans. The agency insures loans for those do not meet conventional loan requirements because they earn too little, have no credit or have not been on the job long enough to qualify. On Jan. 1, the FHA will raise its loan limit to $170,362 in high-cost areas such as Los Angeles, Orange and Ventura counties.

Low interest rates--mortgage rates recently dipped below 7% on 30-year fixed loans--also will help to make home purchasing more affordable. Coming up with a down payment may still be a problem, but private industry and many cities and counties are now offering programs to help with that.

For the first time in a long while, homeownership looks possible for many. That should cheer us no matter what time of year.