Freguently Asked Real Estate Questions-Ep. 5

Should I buy now or wait?

If you are using FHA financing to purchase your next home, I would suggest buying BEFORE April 18th. I follow the real estate blog kcmblog.com, which stands for keeping current matters, and the information below about FHA loans was recently posted.

The administration recently announced increases to the insurance premiums that the Federal Housing Administration (FHA) charges. FHA is the dominant loan program in the marketplace today. The FHA has two types of Mortgage Insurance Premiums – Up Front Mortgage Insurance Premium (UFMIP) and the Monthly Mortgage Insurance Premium (MMIP).

UFMIP is typically added to the loan amount and financed over the term of the loan. MMIP is part of the monthly mortgage payment for a minimum of five years and a maximum of fourteen, depending on the loan-to-value.

For the majority of FHA Insured loans, the MMIP will be increasing .25% effective April 18th which is, in effect, equivalent to a .25% increase in interest rates. The income ratios that lenders use in qualifying borrowers look at the total payment. Therefore, the MMIP hike has the same impact on affordability as a rate hike. Higher monthly costs mean lower loan amounts and lower loan amounts mean lower offers that borrowers can make on houses. This will translate into lower sales prices. Nothing is good in this news. The increase in Annual Mortgage Insurance Premiums for forward mortgage amortization terms is effective for case numbers assigned on or after April 18, 2011.

For example using a 30 year term with a sales price of $163,000, currently the FHA monthly MIP is $118 a month, after April 18th it will be $151, this is a $33 increase in your monthly payment.

FHA loans allow you to get into a house for as little as a 3.5% down payment. I know some of the best mortgage professionals in Omaha. Call me for a referral if you need to get preapproved quickly. Interest rates are still really low. If you are thinking of buying, you can get the best deal now before the increase, so don’t wait!