It is getting to be that time of year again. Even though last week was one of the most hot and humid of the year, school is back in session, Big 10 Football has kicked off and some of the leaves are starting to sport red pigment seeping into the lush green of summer. Fall is coming folks, and with fall some changes to mortgages.
USDA runs their fiscal year from October to October, following the federal calendar. This year USDA had decided to increase the annual premium. What this means is that for all USDA loans originated after October 1, 2014, the monthly mortgage insurance will increase to .5% of the mortgage amount. It has been at .4% for the past few years. While this won't make a huge difference in monthly mortgage payments, it is an increase. Coupled with the increased interest rates that are anticipated by the end of the year USDA loans will be a bit less affordable. So far no word on changes in maps. Last year USDA announced there would be no changes to eligible areas for the time being. I have heard no word if there are changes planned to the maps this year.
Another change that is occurring is with FHA. This change will occur in January of next year. FHA has always charged interest for an entire month no matter what time of the month an FHA payoff was received, meaning if you sold your home or refinanced your home an entire month of interest would be charged. Contrast this to all other types of loans which only charge interest to the day of closing. Due to investigation provided by the Consumer Financial Protection Bureau, FHA will be required to do the same. So that is good news for owners of FHA mortgages.
This year was also the year that the housing market was going to come roaring back. So far while there have been spurts of activity, overall nationwide the market has resembled this guy
more than this guy.
wikimeida.com
The reason for a bit of a soft market this year? What I hear from buyers that I have spoken with is that they aren't finding the types of properties available that they want. And, facts would back that up. There are a few price ranges that homes are snapped up as quickly as they come on the market while in other price ranges they languish like a 1920's drama queen.
Normally first time home buyers make up 40-43% of the housing market. This year the first timers have only been 33%. The reasons tossed about are varied, student loan debt, access to jobs, or a desire to put off home ownership a bit longer. In any case, with the rise of rents, I believe this is a temporary issue. With few exceptions you have to pay to live somewhere, and what people are willing to pay in rent has its limitations. There is also a new generation of buyers who have never experience more normal interest rates. And by more normal I am speaking of rates in the mid 6's.
So what does this mean? It means that we may have a shot at a good fall market, so those who have been waiting for a buyer shouldn't despair. There is often a nice spate of activity between mid September and November 1st. This year it may be increased. The Federal Reserve is surely going to begin to raise interest rates soon. Once that happens mortgage rates will go up. So now is an excellent time to get in on low rates.
Changes are being offered by conventional lending as well that should assist buyers with qualifying for mortgages. 5% gifts from family members, Lender Paid Mortgage insurance, or non occupying borrowers as long as the down payment is being provided by the borrower. (This assists those that need a bit of help due to job time or debt ratio concerns.)
FHA has also become quite a bit more flexible in credit scoring so an FHA loan may be the ticket to home ownership for more borrowers than ever.
It is true that lending is ever changing, but in many ways it is accommodating more borrowers than we have seen in the past several years. So dip your toe in the mortgage pool-you may find out its fine.
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