You're reading...
Market News and Trends, The Business of Real Estate

Mortgage insurance rates going up


RISMedia reports this morning that a bill authorizing much higher mortgage insurance rates for FHA loans has passed the House overwhelmingly:

FHA Reform Act and Annual Mortgage Premiums; What an Increase Means for Borrowers

The bill now goes to the Senate, where it will presumably pass quickly, and then go on to the President for signature.

The portion of the mortgage insurance premium collected at closing already went up in April 2010, from 1.75% to 2.25%.  Now, the change authorized by this new bill will affect the amount built in to every monthly payment on the mortgage, apparently beginning with loans originated in 2011.  The FHA commissioner says they don’t plan to move to the new maximum rate immediately, but if and when they do it will almost triple the amount of each month’s payment that is mortgage insurance.

In Texas, property taxes and interest will still represent the vast majority of most mortgage expenses, especially in the first 5 to 10 years of the loan.  Don’t minimize the effect of this change, however.  For homebuyers with minimal cash available for down payment, FHA has become the best available mortgage loan alternative — by far!  An increase in the monthly mortgage insurance premium will reduce the loan amount, and therefore the purchase price, a prospective buyer can qualify for.

The RISMedia article includes two examples.  In both cases, the amount an FHA borrower can qualify for is reduced by more than 10%.  For someone planning to buyer a median-priced house in Austin, this will reduce the allowable purchase by more than $20,000!

So we have seen the end of two homebuyer tax credit programs.  We also saw the end of the Fed’s support for mortgage-backed securities, which held mortgage interest rates artificially low for more than a year.  (Investors’ fears about the world economy have staved off the inevitable rate increase so far, but mortgage professionals that I know still expect higher rates by the end of this year.)  Now, it looks like every house purchased next year with an FHA mortgage will cost more than it does today. 

If you are planning to become a homeowner in the next 12 to 18 months, and you have the ability to make a 3.5% down payment, now it your time.  Don’t wait until 2011!

Advertisements

About Bill Morris, Realtor

More than thirty years of business experience (high tech, client service, business organization and start-up, including many years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs: -- Seller Representation is a comprehensive process that begins with thorough market analysis and consultation, continues with properly staging the home to achieve the highest price possible in a reasonable time on market, a complete program of marketing and promotion, ongoing updates and communication, closing coordination, and follow-up throughout (and after) the sale. -- Buyer Representation is also full service: shopping, previewing, price and market consultation, contracting, negotiating, coordination of inspections, appraisals, repairs, and closing details, and follow-up beyond the closing of your purchase to ensure your lasting satisfaction. Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game. I go the extra mile to help you achieve your goals. That's why I constantly research the market and property values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: