Financial Reasons to Buy a Home NOW!

Watch on your mobile device >>

Taken from http://www.kcmblog.com/2013/03/26/3-financial-reasons-to-buy-a-home-now-part-ii/

This week, we are going to look at the three financial reasons to buy a home now instead of waiting: prices are rising at an accelerated rate, interest rates are increasing and rents are skyrocketing. – The KCM Crew

Interest Rates Are Increasing

A big component in the cost of a home is the mortgage interest rate a purchaser pays. Understanding where rates are headed will help in making a decision whether to buy now or wait.

So, Where Are Rates Headed?

No one can know for sure. The Fed has been artificially holding rates down to stimulate the economy. However, as the economy improves, many experts expect rates to creep up. As an example, HSH Associates, the nation’s largest publisher of mortgage and consumer loan information, recently explained:

“The stronger the economy becomes, the higher rates may grind; the Federal Reserve is keeping them low to goose the economy, but an economy responding to the Fed’s medicine will soon see less of a need for it in order to function. If not otherwise manipulated, higher rates are the natural result of a growing economy, as rising demand for available credit supply and concerns about inflation allow costs to rise.”

The Mortgage Bankers Association (MBA) agrees. They were quoted in HousingWire late last year regarding their thoughts on where rates would be headed in 2013.

“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association predicted.”

In the MBA’s latest Mortgage Finance Forecast they forecast that the 30 year interest rate will be 4.3% by the end of the year. This represents an increase of almost a full percentage point from the 3.4% rate available at the end of 2012.

For example, we show the impact a one percent increase in rate will have on the monthly principal and interest payment on a $200,000 mortgage.

Freddie Mac’s Weekly Primary Mortgage Market Survey reveals that rates have increased by 2/10ths of a percentage point already this year.

As we mentioned, no one knows for sure where rates will be a year from now. But, many experts think they may be as much as a point higher. With rising residential real estate prices and the possibility of higher mortgage rates, waiting to buy a home makes no sense in our opinion.

Real Estate Is Heading Back to Its Better Days In Omaha and Other Areas

Watch on your mobile device >>

After the housing bubble burst in 2007, there was no telling how long it would collectively take the nation to bounce back – much less the Greater Omaha area. After several years of difficult times, including countless foreclosures, short sales, bankruptcies and setbacks to our economy, we can finally say that it’s time to move on – literally.

Home Prices Expected to Rise Annually for the Next Five Years

More and more consumers are reaping the benefits of a stronger economy and it is apparent in the very strong numbers showing up on the newest Fiserv Case-Shiller Price Index. Across the board in the country in many markets, including our local marketplace, homeowners are enjoying increased values. What’s more, the Fiserve Case-Shiller index cites potential increases to the tune of more than 3% annually moving forward through the next five years.

Taking a close look at the relatively recent past of our housing market, we saw an increasing inflated bubble from the late 1990s to 2006, at the height of the market’s boom. But it didn’t take long for the harsh impact of our real estate crisis to hit home, with prices plummeting almost 40% to as late as September last year.

Recovery On the Horizon in Many Major Metro Areas Across the Nation

Sometime in the fall of 2011 we started to see some improvement, more so in some areas than others. Among those once hardest hit areas that have come back with a bang from September 2011 to 2012 are Detroit, San Jose, California and the strongest comeback metro area, Phoenix with a 21% increase in prices during that time.

The news isn’t all that good in some regions where foreclosures are still a concern and the housing market has a long ways to go before calling it a recovery. Prices declined in Long Island at just over 8%, two cities in Georgia also faced a continued downturn on home values. In each there was a significant increase in the number of foreclosure filings.

Homes Prices Increase Predicted As High As Ten Percent

Moving forward, Fiserv Case-Shiller predicts more of the same that we have been seeing in Omaha in other parts of the country, with a rise in prices as high as ten percent.

What does this mean to residents of Omaha? It means that as prospective buyer, now is definitely the time to get in before prices go further up. Interest rates are still phenomenally low and FHA has not implemented the new changes to take place in early June of this year.
~
For a comprehensive look at your options, contact the Mortgage Doctor today! You’ll be on your way to making your real state dreams come true!

The FHA Announces Two Big Changes That Will Cost Borrowers Thousands More

Watch on your mobile device >>

For the longest time homebuyers have relied on FHA loans to obtain mortgages using just 3.5% down. These government-backed loans have historically helped borrowers that otherwise might have had a hard time getting a loan to become homeowners. All FHA loans require the borrower to pay Private Mortgage Insurance, a premium paid each month by the buyer to insure the lender against default. FHA covers the insurance.

In light of financial troubles and exhausted reserves, the FHA recently announced that it would be changing its program. The two biggest changes have to do with the amount of premium due each month as well as the length of time these premiums are due.

Increased PMI Premiums To Take Effect April 1, 2013

Right now, all borrowers that put less than 20% down on their FHA loan are expected to pay 1.25% of the loan amount each month but effective April 1 of this year, the monthly premium amount goes up to 1.35%. On a $200,000 home that increase amounts to about $17 each month.

PMI To Be Charged for the Life of the Loan For Minimum Down Payment Borrowers

The second change will have a lot more impact on borrowers. As of right now, all FHA loan holders are required to pay PMI until they either have 22% equity on their home or for the first five years of the loan (with a minimum PMI payment period of 5 years). As of June 3^rd 2013, borrowers that put less than 10% down will be required to pay PMI for the life of the loan. Furthermore, if borrowers do pay 10% down, they would have to continue with PMI for at least a minimum of 11 years.

Buyers Must Be Under Contract By March 25, 2013 To Avoid Lifetime PMI

The mortgage industry expects a flood of new FHA applications, especially prior to April 1^st since for FHA loans that have a case # assigned by April 1^st, the lifetime PMI change will not apply. What this means to you as a buyer is that you should aim to be under contract by March 25^th so that you can get your FHA case # back by April 1^st. This does not mean that you need to close on your loan prior to April 1^st of this year.

Conventional Loans Will Likely Become More Popular

With these adjustments to the program, conventional loans will likely become more popular. Consider this comparison of a FHA loan with a conventional on a home priced at $200,000, once the changes have taken place:

Type of Loan	Down Payment	Monthly Mortgage Insurance
FHA	$7,000	$220
Conventional	$10,000	$113

Looking at the above example, there would be a savings of $1,300 each year by opting for a conventional loan.

Changes Being Made to Rebuild FHAs Financial Reserves

There are two reasons for these changes. First, the FHA is trying to recover its reserve and second, the organization expects to reduce the number of FHA loans it insures with the expectation that more borrowers will turn to conventional loans.
~

If you would like to find out more about this, or better yet if you want to avoid having to pay month after month for the life of your FHA loan, contact us today and we will help you find your new home. Don’t wait – this one is huge.