We knew this was coming but it's becoming a reality in the very near future. Buyers need to seriously consider these new changes and how they could make delaying a home purchase in 2010 even more expensive.
On the 5th of April, mortgage insurance for FHA loans will increase by half a percent.
Mortgage insurance is financed in the loan so it isn't a huge increase but it will be felt at closing and during the 30 years worth of payments. If you do not want to have to pay for this increase in mortgage insurance, you will need to be under contract before the 5th of April 2010.
We think the change with even bigger implications will happen in a few months when maximum seller credits will be reduced from 6% of the purchase price down to only 3%. For a buyer purchasing a $400,000 house that could be a potential credit reduction from $24,000 down to $12,000. While our area isn't seeing many if any, buyer credits in the 6% range, some of the harder hit areas of the country will find this to be drastic.
Overall our current market for entry level homes is still very strong. Buyers have yet to see the increased inventory that many have hoped for and interest rates have remained low. FHA buyers can expect that the purchasing of homes in the nicer areas of Orange County will be difficult since sellers are still showing a strong favoritism for conventional or all cash buyers. However, FHA buyers who don't have to have the very best deal in the very best neighborhood or the very worst fixer in the very best neighborhood are finding that these low downpayment loans to be a true reality. Bottomline, if your going FHA you probably will have to compromise. If you can't compromise, save more money for a conventional downpayment.