Montgomery County loan officer
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
First-Time home buyers continue to thrive in this market. Historically low interest rates, new tax credits, large inventory, and aggressive pricing by sellers has attracted many people to the thrill of home buying and ownership. Recently, I have been working with a very large number of first-timers. I have found that most of these buyers are looking within a price range of $250,000 and less. Between 2004 and 2007 it would have been almost unheard of to find a detached home or even a town-home in Montgomery County within this price range. However, due to the reasons stated above, I am helping more and more people accomplish this dream and goal.
Of course, many of these homes are bank owned or are selling through the short sale process, but not all. Even “normal/conventional” sellers must compete with the aggressive pricing caused by the high number of foreclosure or distressed sellers. Not only are buyers getting great deals, but they are also finding out that they can purchase a home while having the sellers pay their closing costs. While it has become harder to find down payment assistance, it has become almost standard to have the seller pay all of the buyers closing costs. In some cases, buyers can get a seller subsidy even greater then their required cash to close. Usually, closing costs are about 3% of the sales price. Lately, I have helped buyers get up to a 6% seller subsidy and use the additional funds to buy down their already historically low interest rate.
As a friendly reminder to my readers and any first time home buyer it is imperative that you speak with a loan officer first and complete a loan application. The fun part of shopping for homes with a realtor cannot begin until you know what you are approved for and what you are comfortable on a monthly basis.
Category : Blog