It’s Crunch Time
It’s Crunch Time
Is the market about to close up for our homebuyers? With all the great deals going on in the Federal Reserve (mortgage backed securities—keeping interest rates down) ending on April 30th this year, the FHA will be increasing the insurance premium costs to homebuyers. Keep in mind that FHA loans are what comprise a lot of the loan industry lately.
What does this mean for you? Connect Realty Fair Oaks is going to explain.
As always, our Realtors at Connect Realty Fair Oaks want to keep you informed about all the great deals. In addition, we want you to know when to take caution and heed advice as to if this is a good time for our homebuyers to stand back or stand forward when purchasing s home.
Everyone should know it is never good judgment to rush into anything, let alone, buying a home—regardless of any circumstance. There are indications that housing costs will weaken through the remainder of this year, making the splendid deals of the year obsolete. Lastly, those with less than perfect credit should also read this review because you may be better off buying a home in another year or two—in other words holding out until you are stable enough to handle the rising premiums ahead.
Why should you buy now? As mentioned in a previous post, there is a first-time homebuyer tax credit, and a new home tax credit still available until April 30, 2010. Although, buyers will have until June 30, 2010 to close their transactions, it does not look like any further expansions on this credit will be enforced. Missing the April 30 deadline would mean you would miss out on some great deals.
Furthermore, when the Fed buys the remaining 1.25 trillion mortgages it has been purchasing the past year, a larger impact on housing costs will rise. Up until now, 30 year fixed rates have been holding a steady rate of 5 percent, but most observers say it will rise with a vengeance immediately after this last purchase ends—as much as 1 to 1.5 percent! (ie, $250,000, 30 year fixed loan with a 1 percent increase could make that payment as much as 1,800 per month!)
Also, the mortgage insurance premiums will change and that one time fee paid at closing could cost you not half percent, not 1.75 percent, but as much as 2.25 percent! (For a 150,000 FHA loan it would increase by $750, and bring that payment to $3,375). This only applies to FHA loans, but keep in mind these loans are taking up a large portion of the housing market
Why should you wait? If you feel as if you are ready to buy you should by all means not worry about buying right now. Although, the housing prices may seem to be bottoming out nationally, there are still a few good spots on the map to consider. With the foreclosure future due so soon, some areas could see a decline of another 5-10 percent in 2010. In retrospect, it would make up for the missing tax credits and low interest rates.
In addition, if you do not have great credit, and cannot come up with a 20 percent down payment, it may be in your best interest to wait. The majority of lenders want to see a credit score of about 720 to approve the average loan, so the combinations of a low credit score and a small down payment could prove to add about 1-1.5 percent to your interest rate. If you cannot come up with a 20 percent down payment, you will need private mortgage insurance—that could cost you another half percent in interest! In other words, if this is you, then we recommend you wait one or two more years to get your credit in better shape, so you can qualify for a lower interest rate.
In conclusion, don’t rush, and think it through. Give yourselves some time when you know your credit is not up to par and money is tight. On the other side, maybe you feel you are ready to make a down payment, and your credit is the best it has ever been!
Contact our Fair Oaks Realtors at Connect Realty and get the skinny on what is best for you right now. Never will we steer you in the wrong direction, because we value honesty, integrity and dependability!
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