Puget Sound Real Estate: Bremerton Real Estate Talk | More Changes to FHA | Interest Rates

Maybe you are on the fence.  Maybe you just can't decide if you want to purchase now.  Maybe you are thinking that the market hasn't bottomed out yet so you are going to wait.  Maybe...

If you are on the fence even with the $8,000 First-time home buyer tax credit, even with historic low interest rates, even with lower prices, the new proposed FHA Policy Changes just might help you make a decision.  That and predicted higher interest rates. 

Over the last couple of years we have seen almost every loan program disappear with a blink of an eye.  I think there are  two zero down programs left - VA and USDA. Of course with both of these programs there are requirements you must meet and the for USDA the property must meet. 

Then you have a conventional loan program which usually will require a 20% down-payment and then the FHA program - the program most of your parents used to purchase their first home.  Back in the day it was the only program for those that didn't have much for a down payment and even less for closing costs.  As home prices increased so did the percentages of down payment/costs. 

Today, for most first-time home buyers FHA is the most used product.  Which of course has changed a little in the last year.  The down payment required was 3% and is now 3.5%. Not too bad of an increase, but an increase.  But coming this spring you might see some huge changes that will really impact your out of pocket expense.  You can read all the changes here - Announced FHA Policy Changes. 

These are the changes that are really going to effect the amount of money you need to close and will also effect your monthly mortgage payment.

Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending

• The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
• If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
• This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
• The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

Reduce allowable seller concessions from 6% to 3%

• The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
• This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

To make things even scarier come April 1st the Federal Reserve is suppose to end its debt purchase program and allow the US mortgage market to operate unassisted.  Some speculators believe that mortgage rates will rise about 3/4 of a percent to about 6%.  I have seen those that think the rates might go higher. Who knows?  There is no real estate crystal ball.  But let's say that the rates do rise to 6%, your purchase power is really jolted.  On a $200,000 home your payment could increase around $90.00! That is $1080.00 per year.

Don't loose the purchase power you have now. 

 

Author:Jo Soss

Jo Soss is the designated Broker and the owner of Homefront Realty in Bremerton Washington. Selling real estate in the greater Puget Sound area since 1994 she has vast knowledge in all aspects of a real estate transaction. Using today's technology with her signature personal service allows her to achieve complete customer satisfaction.

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