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Those Who Wait Will Pay Thousands More This Spring

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board's mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these "seller concessions" can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

  • January 28 2010 - Town of Hampton
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Answers (11)

Tom....That is absurd!

Pressuring folks into the largest financial obligation of their lives is a bad idea!  What happens if property values continue to decline?  The .50% increase in UFMIP could pale in comparison...No one should buy because of fear!
  • January 28 2010
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Profile picture for Texas Banker
I vote property values will dip again,

In addtion to:

Home Buyer Tax Credit going away, and cost of financing is increasing:

Fannie / Freddie might be gone soon:

http://www.wjla.com/news/stories/0110/698873.html

Also:
http://www.bloomberg.com/apps/news?pid=20601070&sid=auzqsRLscCSY

Guess who will pay for this?
  • January 28 2010
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Profile picture for wetdawgs
Those who wait will save thousands of dollars over the next two or three years as house prices continue to decline.   Don't listen to NAR propaganda!!!!!

What is $8,000 and higher FHA mortgage fees compared to 10 or 20% drops in housing prices?   One wins by waiting.

  • January 28 2010
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Profile picture for TomMcGuirk
For those buying this spring -- not waiting for "years" -- a few extra days WILL costs thousands.  It is the responsibilty of real estate professionals to make customers aware of current market conditions and programs that are disappearing.

Price may be better later but, if there is limited fiancing available, it will ONLY benefits buyers in an extremely strong equity position.  Not all customers are in that position but that doesn't mean that they should not buy a home when they have the opportunity and the means to support their purchase.
  • January 28 2010
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FHA Financing is not going away...Seller concessions drive up the sales price and increase the amount financed.  The UFMIP is increasing by .5%...$1,500 on a $300,000 loan.  If it gets tougher to finance a home prices will drop and I will be willing to bet if they drop it will be by more the $1500 bucks!

Who benefits from making consumers act out of fear? 
  • January 28 2010
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Profile picture for sunnyview
"It is the responsibilty of real estate professionals to make customers aware of current market conditions and programs that are disappearing."

I am having a hard time swallowing that one. You make buying sound urgent, but people that are that close to the edge need to be very careful buying in this unstable market. I would like to agents like you to be honest about the ongoing cost of homeownership and the need for sufficient reserves before you buy. Ownership is like pregnancy. Getting knocked up is easy enough, it's figuring out how to buy the diapers that is harder. Ownership is great, but I would just like to make sure that people that buy now can afford their house later.
  • January 28 2010
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Profile picture for SoCal Engr
With the current market conditions, the person most likely to "feel the pain" will be the seller. Without the incentives to buyers, it will fall on the sellers to make their offering more appealing (i.e., lower prices?).
  • January 28 2010
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For those concerned about inflation, meet the real terror: deflation.

As housing costs go down borrowers put off the purchase which creates further downward pressure on prices.

I'm betting the gov't will extend the homebuyers tax credit, if only to keep some wind in the sails.

  • January 28 2010
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Profile picture for TomMcGuirk
Unfortunately, the point has been misconstrued.  I was not suggesting an urgency to buy RATHER, for those that are buying this spring, the difference of an application for FHA financing from March 30 and April 1 would be costly.

Take that for what you will.
  • January 29 2010
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In other words..."what a difference a day makes"
  • January 29 2010
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LOL! So are you Lenders telling me that when a potential Buyer calls you to get pre-approved you are telling them it's NOT a good time to buy and to wait a few years????

  • January 29 2010
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