Tag Archives: local market

2011’s financing climate promises a more challenging, and expensive home-buying process. The good old days, when you didn’t need a job or a substantial down payment to purchase a home, are over. In the past several years, home financing has seen many changes. Higher credit scores, substantial down payments, and proof of regular income are now status quo for successfully qualifying for a mortgage. As we move further into 2011, financing could be even more challenging.

The remainder of the year will bring a few certain changes and a few other strong possibilities.

Among the certainties: FHA – In April, mortgage insurance premiums (MIP) increased .25 percent on all 15- and 30-year FHA loans. This works out to a $30 – $60 per month mortgage payment increase on average. There is also some talk about FHA increasing down-payment requirements on loans that once provided one of the lowest down-payment options available to consumers. The bottom line is: higher monthly payments due to higher mortgage insurance premiums and possibly larger down-payment requirements will make it more difficult for many consumers to purchase.

• Jumbo Loans (above $417,000) – On October 1, temporary high-balance loan limits could expire, which means that loans above 115 percent of the median sales price in that local market will be considered “jumbo.” In King, Pierce, and Snohomish Counties, the current loan limit is $567,500. In the Portland Metro region, it’s $418,750. Though it’s unclear how low these limits might fall, we know they will not go below the floor of $417,000. This change affects buyers because jumbo loans require high credit scores and larger down payments, and tend to come with higher interest rates. Sellers with homes above these price ranges will also be impacted due to a smaller number of qualified buyers.
• Conforming Loans (below $417,000) – The fees Fannie Mae and Freddie Mac charge lenders to guarantee their loans are going up. Those extra costs will be passed on to borrowers.

Possible changes (some likely, some less so) throughout the year include:

• An increase in risk-based insurance premiums and higher interest rates charged based on credit scores and down payments.
• Possible reduced mortgage interest deductions for consumers with higher balance loans
• Initiatives to winding down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Because this issue is still being debated in Washington, D.C., it is not certain what these changes could entail.

Though it will be some time before we know when or if these items will come into play, it seems that higher borrowing costs and reduced availability of funds due to increased regulatory measures are all but inevitable.

For current and prospective home buyers, there is virtually no upside to waiting or in trying to time the market. The certainties we know and the possibilities we anxiously await word on mean that the costs associated with purchasing a home will only get more expensive as the year goes on.

So if you, your family or friends have been thinking about buying or selling and putting it off because the “market is so bad,” now is the time to talk with me. Sellers benefit from today’s low interest rates as much as buyers. NOW is the time to act. Please do not wait. We could see rates approaching 6% in 12 months and 7% will come right on top of 6%. Call me or email me. I look forward to hearing from you – soon.