Tax Credit & FHA Loan Modifications Fueling Market
Ok, so we all know(or should know) the federal tax credit expires on April 30th. Just to clarify, you must have a ratified contract by April 30th and must settle by June 30th. Obviously this has been a strong motivational factor to buy for a very long time. Especially when the incentives were increased to $8,000 for a first time home buyer and $6,500 for move up/repeat home buyers.
However, on top of the tax credit expiring, we now have some changes to FHA loans that buyers need to consider as well. These changes will be effective April 5th so if you’re looking to buy right now you need a FHA case file by that date in order to use the old changes. If you’re obtaining a conventional loan than this will not apply. FHA(Federal Housing Administration) is raising it’s upfront MIP (Mortgage Insurance Premium) from 1.75% of the sales price to 2.25% of the sales price. This insurance premium is financed into the loan so it is not an exuberant amount, but will change the monthly payment. Here’s an example:
Sales Price: $400,000 Loan Amount Minus Minimal 3.5% DP: $386,000
FHA MIP @ 1.75% of $386,000: $6,755 Total Loan Amount: $386k + $6,755=$392,755
FHA MIP @ 2.25% of &386,000: $8,685 Total Loan Amount: $386k + $8685=$394,685
So, while it is a rather small amount when financed over 30 years, it’s still more money you will need to pay.
The other change that will become effective for all FHA loans not filed before April 5th is the amount of seller subsidy a buyer will be allowed to obtain. Currently a buyer could receive 6% closing help/seller subsidy on all FHA loans. However, it will soon be only 3%. Typically, your closing costs are no more than 3% when obtaining a loan, but buyers have been getting additional money to buy down their interest rate. However, that will no longer be an option and with whispers of potential interest rate hikes, this could be critical to some. The best thing to do now if you’re looking to obtain any type of loan and buy a home is speak with an experienced loan officer and an experienced real estate agent to make sure you are informed on all the upcoming changes and guided to a successful purchase and loan.
Ben White-Montgomery County Specialist
The Choice Real Estate Team
ReMax Town Center
Category : Blog
FHAexam
Jun 09, 2010
Nice post… Does anyone have any updates on Obama’s plans for FHA in 2010? I heard they were supposed to be making changes.
claim insurance
Jul 03, 2010
Really love all these stories.. have been reading them daily. Please add more if you have any… Thanks a lot again for this awesome work.
Season Widger
Sep 30, 2010
Outstanding article! I enjoy coming to your blog because of you often publish great articles. I enjoyed it once again. I in the process adding to favorites this website. I am planning to subscribe to this feed also. Take Care! ..