Big Loans, Lower Rates

The government's new economic stimulus package is likely to benefit some people buying or refinancing a house -- but not all.

As approved so far by the House, the package would raise the maximum mortgage that lenders can sell to big mortgage buyers Fannie Mae and Freddie Mac. That cap -- now $417,000 -- matters because rates on larger "jumbo" mortgages are higher these days by as much as a full percentage point.

Under the House bill, the "conforming" loan limit would rise for one year to as much as $729,750. (Many parts of the country would be limited to 125% of an area's median home price.)

If it becomes law, the change will allow more consumers to either buy a home or refinance one using a conforming mortgage. That could be particularly beneficial in areas, including parts of California and New York City, where $417,000 buys only a bungalow or small apartment.

But there's a hitch. Lenders have become increasingly hardnosed about who they'll finance, while Fannie and Freddie are instituting risk-based pricing. The upshot: Borrowers with spotty credit or little home equity won't get the best rates.

Consumers who'll benefit the most from today's sharply lower mortgage rates: those with high credit scores (above 680) or large amounts of equity in their home (at least 30%) or both.