In one of the first moves by the federal government to help stabilize the finacial end of the housing market, it was announced today that they are going to raise the amount they charge for insurance on a FHA loan by .25 basis points. This change will affect all FHA lonas that are written on or after April 18, 2011. The amount may not seem like a lot of money; however, it can affect the financing ability of potential homeowners.
Currenlty the FHA is the largest single source for home loans in America today. With there requirements of only 3.5% down payment of the sale price; it makes them desireable in these economic times and with rates so low advantegous for borrowers.
The FHA average loan amount is $157,000. Based on that sale price for a home; the monthly mortgage payment will increase by $33.00 a month under the new guidelines.
For home buyers the FHA charges an insurance premium to homeowwers in order to back the loan. This is there way of insure them against the loans that do not get paid. Due to the limited down payment required to do a FHA loan the federal governement wants a security blanket (so to speak) to protect their interest in the loan.
Dave diCecco
Realtor/Broker
www.davedicecco.com
Tuesday, February 15, 2011
Monday, February 14, 2011
How Rising Mortgage Rates Can Affect Your Purchasing Power
This past week in the news we have heard a lot being said about the Obama administration trying to change the way Freddie Mac and Fannie Mae are controlled. The government is trying to step out; so to speak of the mortgage business. Now, while I agree with the concept of less involvement of the government; what impact will that have on mortgage rates and consumer buying power?
The propsals presented all have the government eihter taking a more limited role or removing their role completely. This is not necessarily a bad thing. Since these two compnaies are owned by the tax payers and are losing money daily. If we had a business losing money we would close it up. However; the greater impact this is having is what it has done for short term interest rates currently.
Though interest rates are relatively low right now; they are starting the creep upwards. It is getting harder to find the low 4% rate we were getting a few months ago with good credit. That rate has increased about a half to three quarter a point. In the grand scheme of things it may not seem like a large increase. But, it has a factor in the buying power of a potential homeowner.
A half point increase in the interest rate affects your monthly mortgage paymnet about $30.00 a month. This basically averages out to be every half point the interest rate increases menas your income needs to be 3% more to offset the increase in payment. That is assuming you are at or close to the maximum ratio for debt to income.
So, the increase in interest rates can have a trickle affect on the buying power you have or what you are looking at to buy. You may have talked wth a mortgage professional that told you a couple months ago that you could afford up to X amount of dollars and now that has lowered. For every half point the interest rate rises it lowers your purchasing power by $6,000 per every $100,000.
A lot of people write that it is a good time to buy. Maybe. But one thing is for certain. Interest rates are starting to climb as unemployment is decreasing and the economy is shaking itself out of the recession. The longer you wait could dramatically alter the amount of home you can afford to buy.
Dave diCecco
Realtor/Broker
www.davedicecco.com
The propsals presented all have the government eihter taking a more limited role or removing their role completely. This is not necessarily a bad thing. Since these two compnaies are owned by the tax payers and are losing money daily. If we had a business losing money we would close it up. However; the greater impact this is having is what it has done for short term interest rates currently.
Though interest rates are relatively low right now; they are starting the creep upwards. It is getting harder to find the low 4% rate we were getting a few months ago with good credit. That rate has increased about a half to three quarter a point. In the grand scheme of things it may not seem like a large increase. But, it has a factor in the buying power of a potential homeowner.
A half point increase in the interest rate affects your monthly mortgage paymnet about $30.00 a month. This basically averages out to be every half point the interest rate increases menas your income needs to be 3% more to offset the increase in payment. That is assuming you are at or close to the maximum ratio for debt to income.
So, the increase in interest rates can have a trickle affect on the buying power you have or what you are looking at to buy. You may have talked wth a mortgage professional that told you a couple months ago that you could afford up to X amount of dollars and now that has lowered. For every half point the interest rate rises it lowers your purchasing power by $6,000 per every $100,000.
A lot of people write that it is a good time to buy. Maybe. But one thing is for certain. Interest rates are starting to climb as unemployment is decreasing and the economy is shaking itself out of the recession. The longer you wait could dramatically alter the amount of home you can afford to buy.
Dave diCecco
Realtor/Broker
www.davedicecco.com
Friday, February 11, 2011
You Can Purchase A Home With Less Than Perfect Credit
In today's economy most people have suffered some blemishes to their credit becuase of the recession. Unfortunately, as banks tightened their credit standards it made it even tougher for those people to purchase a home. As the banks were restructuring home buyers were getting discouraged as they were unable to purchase a home becuase of their credit score. Well, the leading bank for FHA loans has loosened their standards to help people relaize the dream of home ownership.
Wells Fargo Bank has adopted and changed their policies around to reflect what the federal government will back and insure for FHA loans. There are some guidleines that still need to be followed but here is the synopisis of how they have changed their guidelines:
If you have an average credit score of at least 600 you will still qualify for a standard FHA mortgage as before. The required down payment is still only 3.5% and part of that down payment can be gifted to you.
If your credit score falls between 580 and 599 you will need a minimum of 5% down payment. other restrictiosn will apply.
If your credit score falls between 500 and 579 you will need a minimum of 10% down payment and other restrcitions will apply.
The other restrcitions for scores below 600 are as follows:
Maximum debt to income ratio cannot exceed 43%. This means when you pay the mortgage and any other credit cards, student loans or car payments that total dollar amount cannot exceed 43% of your gross monthly income.
Your down payment has to come from your own funds. It cannot be a gift from anyone. You can use your tax return refund as down payment though.
You cannot have ANY late payments or derogatory credit in the past 12 months prior to applying. (medical collections and hospital bills are excluded).
If you have a bankruptcy on your credit report it must be discharged at least 2 years.
If you have a repossession it must be at least one year removed.
Absolutely NO derogatory credit with Wells Fargo on your credit report.
You will need to have potentially two months of mortgage payments in the bank after closing. However; that money can be a gift from someone.
There may be other restrictiosn that apply. This is by no means all inclusive. However; this is the basic guidelines that most people will fall within.
As we approach tax season and you are receiving tax returns your buying power might be better than you anticipated. the path to home ownership may once again be an option to you again sooner than later.....
Dave diCecco
Realtor/Broker
www.davedicecco.com
Wells Fargo Bank has adopted and changed their policies around to reflect what the federal government will back and insure for FHA loans. There are some guidleines that still need to be followed but here is the synopisis of how they have changed their guidelines:
If you have an average credit score of at least 600 you will still qualify for a standard FHA mortgage as before. The required down payment is still only 3.5% and part of that down payment can be gifted to you.
If your credit score falls between 580 and 599 you will need a minimum of 5% down payment. other restrictiosn will apply.
If your credit score falls between 500 and 579 you will need a minimum of 10% down payment and other restrcitions will apply.
The other restrcitions for scores below 600 are as follows:
Maximum debt to income ratio cannot exceed 43%. This means when you pay the mortgage and any other credit cards, student loans or car payments that total dollar amount cannot exceed 43% of your gross monthly income.
Your down payment has to come from your own funds. It cannot be a gift from anyone. You can use your tax return refund as down payment though.
You cannot have ANY late payments or derogatory credit in the past 12 months prior to applying. (medical collections and hospital bills are excluded).
If you have a bankruptcy on your credit report it must be discharged at least 2 years.
If you have a repossession it must be at least one year removed.
Absolutely NO derogatory credit with Wells Fargo on your credit report.
You will need to have potentially two months of mortgage payments in the bank after closing. However; that money can be a gift from someone.
There may be other restrictiosn that apply. This is by no means all inclusive. However; this is the basic guidelines that most people will fall within.
As we approach tax season and you are receiving tax returns your buying power might be better than you anticipated. the path to home ownership may once again be an option to you again sooner than later.....
Dave diCecco
Realtor/Broker
www.davedicecco.com
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