January Update – Mortgage Rates

My phone was buzzing with questions from clients wondering if mortgage rates would be impacted from the Federal Reserve’s decision to raise the key fund rate. “If only I had a crystal ball,” was what I found myself saying.

It’s important to note that home mortgage rates are not directly tied to the Federal Fund Rate. Revolving lines of credit, on the other hand (think: home equity loans or credit cards) are more closely related. Mortgage rates follow bond yields, specifically the 10-year treasury.

While I don’t have that crystal ball, analysts and economists from organizations like the Mortgage Bankers Association or government-sponsored funders like Fannie or Freddie are predicting that mortgage rates may increase gradually over the next year. Take a peek at the chart below for what they’re predicting. Mortgage Rate Projections

FHA Loan Limits Increase

Also this month, the Federal Housing Administration (FHA) increased FHA loan limits to both counties Utah and Salt Lake County. The FHA loan limit for Salt Lake County is now $312,800 (up from $304,750) while Utah County is $303,600 (up from $293,250).

My take: There’s no need to hit the panic button; in the big historical picture, mortgage rates are still very low. However, if you believe the predictions, then now is the time to buy and you’ll only pay more interest the longer you wait. We had also hoped the FHA limit changes would be more substantial, but there are still many homes available that fall in those guidelines, and can be had for minimal down payment.

Posted on January 5, 2016 at 1:31 am
Scott Steadman | Category: Market Update | Tagged ,

Big Changes to FHA Loans

 

The 3.5% down payment on FHA loans could be more expensive for buyers than expected. Beginning April 1, 2013, the mortgage insurance premium will go up by .1% to 1.35% which may not even be noticeable to most would-be homeowners.
 
The staggering increase will occur on 6/3/2013 when FHA’s policy on the duration of the required mortgage insurance will be increased for the life of the mortgage. It basically doubles the amount of total MIP if the loan is paid to term.
 
(Regarding the current MIP duration: When the unpaid balance reaches 78% LTV of original purchase, the MIP can be released. In any event though, the minimum time must be five years.) 
 
Currently, the MIP is required for approximately 9 years 9 months with normal amortization. The new program would require the MIP for the life of the loan. In this example, the initial monthly MIP is $196.88 which decreases based on amortization.
 
There are buyers that qualify on income and credit who may not have the necessary additional down payment required for 80% and 90% conventional loans. The 3.5% FHA program has provided a great vehicle to get into a home with a minimum amount of cash.
 
For homeowners that expect to stay in their home for ten years or less, the new changes might not have much financial impact. Homeowners who expect to be in their home long term can refinance with a conventional loan without mortgage insurance once the equity has increased due to amortization and appreciation.
 
For buyers to avoid these increases, they will need to act now to get the FHA commitment issued prior to these change dates.
 
Source: http://www.kcmblog.com/2013/02/19/fha-more-expensive-than-expected/

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Posted on February 27, 2013 at 6:01 pm
Scott Steadman | Category: Uncategorized | Tagged , , , , , , , , , , , ,