Wednesday, February 23, 2011

First Time Home Buyers

Because of the drop in housing prices and the interest rates still being low, now is a super-great time to buy! I know many have waited for more signs that the market has “bottomed out”, but will you be risking more money in the long run?

I’ve heard it projected that housing prices may continue to fall over the next year, but interest rates are also projected to be rising this year. Over the life of a 30-year loan, you need to weigh the benefits of going ahead and purchasing your home now at the lower rates rather than waiting for a possible “bottoming out” of the housing prices.

There are some terrific deals on the market right now that you could take advantage of. Make sure you are staying on top of the real estate market as well as the mortgage market as you consider the purchase of your first home! Your dream of home-ownership may be closer than you think!

Tuesday, February 22, 2011

FHA releases info about premium increase

We received word of this today...

WASHINGTON – Feb. 22, 2011 – Effective April 18, the average FHA-backed mortgage will cost new borrowers about $30 more per month. In a letter sent yesterday, Assistant Secretary for Housing/Federal Housing Commission David H. Stevens explained the change, which will increase the mortgage insurance premium (MIP) on all 30-year and 15-year loans by a quarter of a percentage point (.25).

The increase impacts FHA loans with a case number assigned on or after April 18, 2011.

According to Stevens, FHA must increase its Mutual Mortgage Insurance (MMI) fund reserves – a two percent capital reserve ratio – to comply with current law.

“The MMI fund has been below the two percent threshold in our last two annual actuarial reports to Congress,” Sevens says; and that at the current rate, MMI will not meet its mandated level until at least 2015. “Raising the annual premium will enable FHA to increase revenues … Based on current volume projections, the annual MIP increase would generate an additional $2.5 - $3 billion annually.”

Stevens defended the increase’s unveiling during a down real estate market by calling the quarter-point increase “a responsible step towards meeting the two percent threshold, while allowing FHA to remain the most cost-effective mortgage-insurance option for borrowers with lower incomes and lower downpayments.

“I understand the concerns of those in the industry about this increase,” he says. “While I do not expect all to agree, we have made these moves to protect FHA so that it can continue its vital mission.”

While the monthly payments on the average FHA loan will go up about $30, it shouldn’t impact closing costs. The upfront MIP remains unchanged at one percent.

To read the Department of Housing and Urban Development’s Mortgagee Letter explaining the change (PDF format), visit HUD’s website.

© 2011 Florida Realtors®