Today the FHA is set to announce that it’s raising its standards for the loans it’s willing to guarantee. The new guidelines have a few big changes, but the one that will impact everyone, is the rise in initial insurance premium paid. In the new guidelines, the amount of MIP (Mortgage Insurance Premium) paid will rise from 1.75% to 2.25% of the value of the loan. Additional restrictions now include: the seller’s ability to help pay closing costs and minimum credit score for down payments. The new loan guidelines say the maximum amount of closing costs that can be paid by the seller is now 3% reduced from 6%. There will also be a credit score requirement in order to get the attractive 3.5% down payment. Borrowers will need a credit score of at least 580 if they want to put only 3.5% down. So what does this all ad up to?
If you’re thinking about buying in the next year it would be best to do it sooner rather than later. The tougher standards for FHA loans won’t impact most people’s ability to get an FHA loan, but it will cost you more to get one. It’s best to try and get any potential purchase done before these new regulations kick in rather than waiting till later. The other reason to buy now rather than later, is rising interest rates. Below, I’ve included a graph of interest rates in Massachusetts for the past month. In this graph, you’ll notice that mortgage rates are on the rise. As of today the average for a 30-year fixed is higher than it was a month ago and if you think back to November rates were right around 5% or for some, below 5% you can see we’ve had quite an increase.
Don’t get caught paying more later than you would if you bought today!
Just wanted to give a quick update to those savvy buyers looking to buy this fall. Mortgage rates are currently around or below 5%. The current 30-year fixed rate is 5.12% and there are some rates as low as 4.875% paying some origination/points. I will update this post with more info as it becomes available.
It’s crunch time for those looking to take advantage of the First Time Home-buyer Tax Credit. The clock is certainly ticking on them to get started and to illustrate that point I’ve added a count down above. The current plan is for the credit to run out on November 30th which gives potential buyers just over 90 days from today to close on a new place. The typical time it takes to close on a place is around 60 days this gives people not a lot of time to find a new place. Granted, some can close faster than others and some people find what they are looking for faster than others but if you want to take advantage of this feature you have to start now. Call 617-449-3642 for help starting the search for your new home.
Smart Money Magazine this month has done a special, on 5 ways to put your cash to work for you. Some of you may have cash from pulling out of the stock market in time or even those of you that just have cash lying around. One of the main points of the article is that real estate is one of the few industries that is expected to keep pace with inflation over next few years. There is even better news for those of you over the age 59 and ½ when it comes to putting your money to work for you.
If you’re over the age of 59 ½ and have a sizable sum in a Roth IRA you can use a “self-directed” Roth IRA to buy a investment property in cash and then take the rental income from that property tax free! The only catch is that you can’t live there, not an issue for those true investors. For many people now is a great time to get into investment properties and this is a great way to earn passive tax-free income. If you’re interested in looking at investment properties feel free to contact us at 617-449-3642.
Financials | chris | 
January 20, 2010 12:20 pm | 
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