New FHA Mortgage Insurance Premiums Increase April 2012

Yes it is true. The federal government Housing Administration is increasing the mortgage insurance on their FHA loans starting in April of this year. FHA charges a percentage of the loan amount as an insurance policy (so to speak) because of the low down payment that is required (3.5%) to acquire a mortgage on a house. The program is great and has helped many home buyers who otherwise would not be able to buy a home get it not a house. But, with the low down payment comes a higher risk and thus increased likelihood of default. The new guidelines which go into effect increase the amount they charge on loans beginning on April 9, 2012. The new rate will be 1.25% of the loan amount for loans with less than 5% down payment and 1.20% for loans with greater than 5% down payment. How does it affect you if you are looking for a house under the FHA guidelines? When I did the calculations for a $100,000 home under the current program and the new one the payment based on the same interest rate increased the payment $10.00 a month. So, in essence for every $100,000 you borrow you will be paying back an additional $10.00 a month. It may not seem like a lot but over the term of the loan it can add up...The benefit to this is that it is tax deductible. But it does not help you out every month just during tax time. You can avoid the increased premium by finding a house and locking an interest rate in prior to April 9, 2012. You do not have to close on the house by then; just have a rate lock and be under contract to close for a house by that date to save the money. Dave diCecco Realtor/Broker www.davedicecco.com

How Does A Low Appraisal Affect You Selling Your Home

In this housing market in charlotte; coming up with a value sometimes is a very difficult task. With so many short sales and bank owned properties being sold the value of a home is subjective. I have talked to many sellers who believe the value of the home is more than what the market is willing to accept right now based on improvements they have done to the house. But, a home is worth what someone is willing to pay for it and what comparable homes in the area sold for. There are Realtors that will price a home higher than the value of the neighborhood in the hopes of getting a little more for theirs based on the condition of the house. When this happens you subject yourself to the mercy of the appraiser. The appraiser is an independent licensed appraiser who is not affiliated with the bank or any party to the transaction. It is there job to arbitrarily justify a price and compile supporting data to support their decision. So what do you do if the appraisal is less than the sale price of the home? A bank will not loan money greater than the appraised value of a home. And a buyer in this market will not pay over appraised value of a home. So, what do you do if you are a seller and have agreed to terms with a buyer and the home does not appraise? Most sellers will work with the buyers to come to a happy median with price and concessions and make the transaction fit. But what if the seller is not willing to concede? How does this hurt them? If the appraiser was doing a loan for an FHA loan and the neighborhood is predominately FHA financed homes it could be disastrous to the seller. An FHA appraisal will stay with a home for six months from the appraisal. So, any other buyer comes in that appraisal (if they are doing an FHA loan) is the one the mortgage lender will use regardless of who they are using to do the financing... If you have an appraisal on your home that comes in lower than what you are looking to sell for; weigh the options before saying NO. It could prevent you from selling your home in the near future as well. Dave diCecco Realtor/Broker www.davedicecco.com