Higher loan limits, set by the federal government as part of an economic stimulus package early this year, were supposed to make jumbo loans more affordable in expensive housing markets. Rates finally have come down on these so-called "jumbo conforming" mortgages, though these loans likely will remain hard to get for most borrowers.

Jumbo-conforming loans range in size from $417,000 to nearly $730,000 and are especially important in expensive housing markets. Depending on the buyer's credit score, appraised value of the home, and the condition of the real estate market in the area, there are three types of jumbo-conforming loans to consider:

• Agency jumbo-conforming loans, which meet or "conform to" Fannie Mae or Freddie Mac guidelines and can be sold to those secondary market corporations or "agencies."

• FHA jumbo-conforming loans, which meet guidelines set by the Federal Housing Administration, a U.S. Department of Housing and Urban Development agency that guarantees home loans.

• Bank jumbo loans, which needn't conform to either agency or FHA guidelines.

"Consumers need to look at all three of those [loan types] because their particular circumstances may make one or another of those options the better option for them," says Frank Sillman, CEO of Indymac Mortgage Bank in Pasadena, Calif.

Until recently, Fannie Mae and Freddie Mac weren't authorized to purchase loans of more than $417,000, except in a few very expensive housing markets. The new limits are based on a percentage of the median home price in each county and can reach up to $729,750 in the priciest areas.

When the new jumbo-conforming loans were announced, there was an expectation that the rates would be similar to those for conforming loans. But for the first six weeks of the jumbo-conforming loans' existence, they were priced closer to regular jumbo loans. That means the rates were often half a percentage point higher or more. For example, at the beginning of May, a borrower in Los Angeles might have been able to get a conforming loan for $400,000 at 6.125 percent, and a jumbo-conforming loan for $450,000 at 6.75 percent.

Finally, in the second week of May, Fannie Mae CEO Daniel Mudd announced that the company would price conforming and jumbo-conforming loans identically. Rates dropped abruptly on jumbo-conforming mortgages. The following week, the rate difference between conforming and jumbo-conforming was anywhere from negligible to a quarter of a percentage point.

Before the change, says Dick Lepre, loan consultant with Residential Pacific Mortgage in San Francisco, "their pricing was 'We don't want to do these loans' pricing. They changed their minds, and the difference was sudden and large."

The typical jumbo-conforming borrower wants to refinance out of an adjustable-rate mortgage "and they're seeking the safety of a fixed [mortgage]," Mr. Lepre says. They pay for that safety: A lot of these borrowers will pay a higher rate on their fixed-rate jumbo-conforming loan than they were paying on the previous jumbo ARM. But they'll have to refinance out of those ARMs anyway, and they're gambling that fixed rates on jumbo-conforming loans will rise.

The FHA loan limits depend on the cost of housing in each metropolitan area and can range from $271,050 in so-called "normal" markets up to $729,750 in some expensive markets.

Homeowners who want to refinance a jumbo-sized non-FHA adjustable-rate mortgage but don't have at least 3 percent equity can consider the FHA Secure program, which allows the current lender to take back a second mortgage to make up the difference between the amount that's owed and the current value of the home, according to the FHA's Web site. The higher limits apply to this program as well.