There are some financial changes coming that we feel are important for buyers and sellers to know. Interest rates are still low and we have heard from some lenders that there may be another small drop before June or July this year. However, the forecast is that interest rates will begin to rise late summer or early fall. We are getting this information from a variety of good sources so it is something you need to know if you are waiting to buy or sell a home. The prediction is that a 7% interest rate is not far off and no one is sure if the rates will creep up or make a dramatic rise.
Another change coming is in FHA loans. FHA loans will soon have an increase of their Mortgage Insurance Premiums (MIP). Fannie Mae and Freddie Mac are trying to prevent a federal bailout and have to make more money on their loans. In the recent past, the MIP rates have gone from .55% of the total loan to what will soon be 1.35%. That takes the MIP payment on a $200,000 loan to $134.00/month! In addition, the ability to remove this payment once the owner has 20% equity in the home will no longer be available. The MIP cost will stay with the loan for the entire duration of the loan. Also, the choice to re-fi to get out of the MIP payment once equity is 20% will no longer be a good option if the interest rate jumps as predicted.
The good news is that right now there are conventional loans that are low down payments like FHA and do not have the MIP insurance attached. As long as the credit score for the buyer is good, these loans can be a much better and lower cost choice!
If you have been waiting to re-finance, we would advise that you do it now. If you have been waiting to sell the home you are in and then buy a larger home, you may want to re-think the timing. We are in one of the strongest seller’s market we have had in a long time, buyers are plentiful, interest rates are low, and inventory above $500,000 is good for buyers. If the home you are in will sell for under $500,000 and is in a high demand area, it won’t sit for long!
Call us if you want to know more!
