Let me start by saying that it seems like Real Estate professionals and Realtors are always saying, "Now's a great time to buy!". I hear it so much on radio advertisements that it gets old (even for me, a Realtor)! Fact is, now is a good time to buy because interest rates are very low (today 4.375% - call for details) and there's a good amount of house inventory out there. It is, however, somewhat difficult to get a loan these days.
A lot of Buyers are getting FHA-insured loans because the borrower does not need a huge down payment (such as 20% of the price of the house) like they may need with a conventional loan.
Now, though, there is yet another reason to buy, and buy soon (like, this month!).
Beginning on October 4, 2010 (less than a month from now), the monthly mortgage insurance on FHA loans is going to really jump. It's going from 0.55% (of the loan amount divided by 12 - for the 12 months in a year) to 0.9%. Ouch. It's the kind of thing that will, not can, will, raise the monthly payment on an FHA loan (all other variables staying the same).
Heather Sozio, a highly-recommended loan office of Prosperity Mortgage Company (a division of Wells Fargo), puts it this way:
"Buyers usually use the FHA product when they don't have a lot of money to put down as a down payment. Because of the small down payment and more risk FHA has to take on, FHA has two different Mortgage Insurance Premiums, Upfront and monthly.
Both premiums are going to be changed with case numbers ordered on and after October 4, 2010. When is a case number ordered? The case number is ordered when we order an appraisal and the case number is attached to the property for 4 months. The case number is usually generated approxiamately 1-2 days after the appraisal is initially ordered. Some case numbers do take longer.
The Upfront Mortgage Insurance Premium will decrease from 2.25% to 1%. It can still be financed into the loan. This would be good news if this is all they would change.
The change in the monthly mortgage insurance is changing from .55% to .9% when your buyers are putting less than 5% down. This increase takes away some of the affordability from your buyer because of the increase in monthly payment. It will be roughly a $8-10,000 decrease in affordability.
If your buyer is able to put 5% down, then the monthly mortgage insurance is .85%."
If you're confused about any of this (because it sometimes sounds complicated), give me a call. I would be more than glad to explain it with clear and concise terms and examples. Or, you can click HERE to send an instant message to my mobile device. (Go to the middle of the webpage that opens).
If you'd like to speak directly with a loan officer, Heather's number is (410) 307-6312 and her email is heather.sozio@prosperitymortgage.com.
If you'd like to begin the loan application process using Heather's secure website, click HERE.
We hope to hear from you, and I hope to be your Realtor one day.
Joe
(443) 865-1069
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