The-BUZZZ.com

The number of contracts to buy existing homes rose as expected in April thanks to the tax credit ending on April 30th. Home sales are actually up 25% over April 2009 and reported a gain over March of 5.3%

Since then there has been a plunge of new mortgage applications. I like what Russell Price, a senior economist at Ameriprise Financial Inc. said, “This is the last hurrah for the housing market for a while…There will be a temporary hangover that will last a few months. The recovery will be a slow process that will take a few years.”

I can say that personally, I have seen a huge increase in refinance applications and a serious slow down in purchase applications over the past three weeks. I think it is silly to make a move simply because of a tax credit. While it is a great incentive, it should not be the only incentive to buy.

In April the 30 year fixed was at hanging around 5.25% today they are as low as 4.75% on a $500,000 home with 20% down that saves you $122 a month! Think about it, lower rates, less competition, you will have less competition writing offers right now and will most likely get a better deal than you would have in April. Not to mention the savings over thirty years vs. the actual “cash” one receives from an $8000 credit. Getting off the fence while it is slow is the best buying strategy there is. My clients who purchased in December 2008 through February 2009 received the best deals I have ever seen. Why? Because there was NO ONE in the market!

Getting Pre Approved is EASY!

My team has 46 years combined experience and we always place an emphasis on low market rates, education of the entire process, and availability in escrow. Check us out or apply online at www.garrick.biz.

Very Truly Yours,

Garrick

As promised in late 2009 the Federal Housing Administration is changing tightening its guidelines in an effort to strengthen its capital reserves which are dangerously low.

FHA Commissioner David Stevens had this to say:
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,”

“When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”

Changes include –

1. MIP being raised from 1.75% to 2.25%

2. 580 Fico and up requires 3.5% down and less than 580 fico = 10% down. (Currently few lenders accept anything below a 620 but there are 1 or 2 that accept 530 and up so this may not be too significant).

3. Seller concessions go down from 6% to 3%

The main change that would affect borrowers is the increase in PMI. Literally 100% of the borrowers I have closed on an FHA transaction have financed the MIP. This basically will increase the loan amounts $500 per $100,000, and raises the payment $2.76 per $100,000 based on a 5.25% interest rate.

As a Loan Officer I was pretty upset to hear that FHA guidelines were tightening. “Isn’t that all we have left for what seems to be at least 50% of the First Time Buyers out there?” was my first thought. These changes are understandable considering the hardships HUD has suffered with the rest of the industry and considering they will actually insure a loan for someone with a low fico and little money. We as real estate professionals should be thankful.

While I don’t like the fact we can no longer get a six percent seller concession the truth is most sellers stop at three to four percent anyway on these transactions. While the 2.25% is not great news for home buyers taking advantage of FHA, at least it will be financed into a low interest 30 year loan (currently).

PERHAPS THIS WILL HELP GET MORE BUYERS OFF THE FENCE AND INTO HOMES BEFORE MORE GUIDELINE CHANGES COME OUT!

LittleFish