A few days ago I wrote about the cost of delaying a home purchase now, when mortage interest rates are rising and home prices in Austin and Central Texas are likely to hold firm or increase slightly in 2011. (See Will higher interest rates cost you your dream home?) In other market areas where home values suffered more during the recession, prices are likely to rise faster, so the incentive to buy soon should be even greater.
Soon, payments on new mortgage loans will increase for another reason — an increase in the monthly Mortgage Insurance Premium on all FHA loans. Since the “mortgage meltdown” in 2007, FHA loans have become the primary vehicle for borrowers who wanted or needed to minimize their down payment requirements. For more see:
In addition to the dramatic increase in monthly payments (and reduction in buying power) that come with higher interest rates, this change will increase mortgage payments by $30 to $45 per month for “typical” first-time homebuyers in the Austin area.
This change will be effective on loans issued on or after April 18, 2011. That’s just sixty days away — plenty of time to find and purchase the right home, but not much time to remain uncertain about whether to buy or not. If home ownership is in your plans, and if you can qualify for a mortgage loan today, now is the time to get busy.
As a Mortgage Loan Officer, I couldnt have said it better. Though they have reduced the UFMIP on FHA loans to 1% and the down payment went up to 3.5 the monthly MIP is now at a rate comparable to Conventional Loans PMI. In addition, the credit score requirements for FHA are becoming tighter and tighter. The solution is to act sooner rather than later. FHA rates are still lower than the Conventional Rates and without commitment fees or other additional processing fees. NOW is still a time to buy while prices are low and value is due to climb as the real estate market in Austin is stable and growing.
Thanks for your comments, Rebecca. The pace of change in you business over the past two years has been absolutely incredible, and it’s not over yet. Right now, almost simultaneous increases in home prices, interest rates, and mortgage insurance premiums should motivate both buyers and sellers.
A little longer term, the fate of Fannie Mae and Freddie Mac is extremely important. They absolutely made some serious mistakes leading into the housing downturn, but a functional secondary mortgage market is a vital part of the business. People with little or no knowledge of our businesses have been making decisions for us in recent years. Let’s hope they get some educated advice on this one.