OK, let me restate that. I hate it when I’m right sometimes…
I’ve been telling my current and future clients that they need to seriously consider purchasing before the end of March. Why March, because the Fed was going to cut back on buying the mortgage-backed securities.
When the Fed does that, it means that whomever buys them going forward may have a greater risk and will require a greater interest rate to compensate for that risk. Higher risk = higher interest rates.
The other issue is that effective April 5, 2010, the UPMIP (upfront mortgage insurance premium) on FHA backed loans is increasing by 1/2%. While this does not seem like a lot, it is an extra $750 that the borrower will pay on a $150,000 loan for the FHA insurance. This is due, in part, to the fact that HUD is losing money due to the volume of claims because of foreclosures around the US.
In the past 7 days, rates have risen .375% on FHA loans PLUS the increased UFMIP. When you run the numbers, on a 30 year fixed rate FHA loan of $150,000 quoted at 5.25% last week, the client will pay an extra $750 up front and $35 more a month.
While not terrible overall, it’s amazing what can happen in a week.
Here’s the next big date to look out for…. April 30, 2010. This is the date that you need to have your new home under contract if you qualify for the $8,000 First Time Homebuyer Tax Credit. See our website at www.nwihomebuyercredit.com for more details.
If you are sitting on the fence about buying, now is still a great time. Although rates are up a little they are still near historic lows and certainly better than they were in the early ’80′s when they were between 17% and 20%.
Any questions or comments? Contact me at scott@nwiloanguy.com.
Scott
Your Indiana source for FHA loans, USDA loans, and FHA 203(k) loans.
