What's Going on in the FHA Market?

Hi everyone. Thanks for joining me again. I wanted to better explain some of the recent changes to the FHA mortgage program and how the changes to the mortgage insurance factor will affect you monthly and moving forward.

As of June 3, the Federal Housing Administration changed its cancellation policy for the annual mortgage insurance premiums. Any new FHA loan has an increase in the monthly mortgage insurance by about 10 basis points. This means for every $100,000, it’s going to cost you $8 more a month.

The biggest difference now is that if you put 5% down or less, you now have mortgage insurance for the entire life of the loan. It used to be that it was gone after 78% was paid and payment has been made for five years.

So, if you have a $200,000 loan, you’re going to be paying about $13,500 of mortgage insurance over five years. Now, with having it for the full life of the loan you pay $81,000 over those 30 years. If you put 10% or more down, you will have 11 years of monthly insurance which is about $28,600.

While these changes are certainly significant, FHA is still a competitive financing option for homebuyers today. Low down payment options, low credit score requirements and higher limits for gift funds and seller concessions are a few of the main benefits that a FHA loan offers.

A FHA loan is one of many financing options available today – including those with no mortgage insurance at all. If you or any of your clients are in the market to buy or purchase a home – don’t rule out FHA right away. Call me and I would be more than happy to compare program options,  rates, and payments to determine what would best meet your needs.

What's Happening with the Rising Interest Rates?

Welcome back to my video blog!

Everyone is up in arms about the rising interest rates! People want to know how it will affect them and their monthly payment.

Let me just put everyone at ease and explain the effect of rising interest rates.

About 6-7 months ago, interest rates were at an all-time low at about 3.5%. Today, they have spiked to around 4.5%. Now, if you have a $200,000 loan for thirty years your payment went up from $895 a month to $1,009 a month; that’s a $114 difference.

The median household income is $51,400. The increase in rates is a 3% difference to your debt-to-income ratio. Will this affect you? It’s not a huge impact, but it can alter your loan amount and down payment.

The market is still great! As home prices begin to increase, now is the time to buy and sell so give me a call at 215.591.0222 x 1630

Don’t Miss Out on Record-Low Rates

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I've gotten a lot of questions lately about what interest rates will do in 2013.  People want to know if the government will keep rates low.  It really depends.  What happening with the economy, the unemployment rate, how bonds are being sold and purchased on the market, home sales prices, how long homes are on the market, and consumer confidence all go into the equation.  As you can see, there are a lot of moving pieces.

Another factor we look at is jobless claims.  Although jobless claims were down, we should wait until March to analyze this number because it could be skewed due to companies hiring for the holidays.  We really can’t get a feel for where the unemployment rate is until spring.

The real estate market; however, is ticking back up.  From 2011 to 2012, the average home sale price is up 11.5%.  This is a big number.  Of course, different pieces factored into this increase with investors coming in to buy foreclosures, distressed properties and short sales. Since there was more demand for rentals, the cost of rent went up. An investor can buy a rental for $150,000 and rent it for $1,800 a month. Beyond investors, first- and second-time home buyers also came into play to increase home sales, so the bottom line is consumer confidence in the market is up.
 
We had this type of confidence in the market in 2009 due to the homebuyer tax credit but we no longer have this incentive.  Now we have a different incentive—record-low interest rates.  It’s definitely time to take advantage of the low interest rates whether it’s to refinance or purchase a new home because we don’t know how long they’ll be as low as they are.
 
Don’t miss my next blog when I’ll introduce you to a product you can take advantage of to get you into your first or next property.
  
If you have any questions, please contact me at jmoderski@gatewayfunding.com or 215.591.0222 x1630.  I’d be happy to assist.