Great news! The "High Balance" temporary Conforming and FHA loan limits has been extended through September 30th, 2011. The "High Balance" loan limits are for loan amounts from $417,000 to $729,750, which is the middle tier between regular FHA/Conforming and true Jumbo/Non-Conforming loan amounts.
Program Reminder: The majority of homebuyers only stay in a property from 5-7 years, especially first time homebuyers. That said, the FHA 5 Year ARM offers an extremely low interest rate, which will increase a buyers purchasing power, offer the possibility for a lower monthly payment, and allow for a buyer to save tons of money in interest payments- which could be used towards savings for a downpayment on a new property or other investments.
The FHA 5 Year ARM works like this:
Your initial interest rate is Fixed for the first 5 years. Then, on your loans anniversary on the 6th year, your rate will adjust to the market rate (up or down), however has safety nets of a 1% annual cap and a 5% lifetime cap. So, worse case scenario on the 6th year when your rate adjusts, the maximum it could increase OR decrease is 1% from your initial interest rate. Your interest rate will continue to adjust each year thereafter, for the remainder of the term of your loan (30 year term). Your rate can never increase or decrease more than 5% from your initial interest rate over the life of the loan. That said, you'd need to make the assumption that your interest rate increased by the full 1% annual cap each year after the initial 5 year fixed period to get to the 5% lifetime cap, which would take 10 years to do so based on this assumption.
The current "break even" comparison for interest paid using the 5 year ARM and the 30 Year Fixed is approximately 12 years based on today's FHA rates. Please find attached a P&I comparison chart for the two programs based on a $425,000 Purchase Price with a 3.5% Downpayment.
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