The title really says it all.
I suppose I'll blog a bit about it though. Maybe even do an SCVRE360 for the more visually inclined.
On September 7, 2010, FHA (Federal Housing Administration) is planning to both increase the annual insurance premiums that borrows pay, as well as decrease the upfront mortgage premium. While it sounds like a wash, and evens itself out, it's not.
The annual insurance premium increase from .55% to .9% of the loan value is really something significant! Let's say you go to take out an FHA insured loan, with a value of $300,000. The annual premium would work itself out to be $137.50 per month, at the current premium charge of .55% a year. Now that it will be increasing to .9%, that annual premium amortized monthly would work itself out to be $225 a month. Almost a $90 increase per month in your monthly expenses. And for some of you, who would already be maxing out your debt to income ratios allowed any given lender, this increase could really mean you will have to purchase a home in a price range a bit less than expected!
So, what about this decrease in the upfront premium? While it is an upfront premium charge, most borrowers do not pay for it in their closing cost, rather, they roll that upfront FHA premium into their loan. For instance, the upfront premium on a $300,000 loan would be $6,750. That amount would get rolled into your loan. It pretty much added about $18 to the cost of that $300,000 loan. Now that the FHA is going to decrease the upfront premium from 2.25% to 1%, that means on a $300,000 loan that upfront premium will be reduced to $3,000, making the additional monthly cost, just under $9 per month. Only a $10 approx savings (on a $300,000 loan), per month, due to this decrease.
Hmmmm? Increase of annual premium results in approx $90 per month increase in fees. Decrease upfront premium, results in about a $10 savings…all on a $300,000 loan. We can see that one really does out-weigh the other.
This increase (and decrease), will go into effect for new borrowers only.
I'd say, if you're in the market to purchase a home in Santa Clarita, or anywhere for that matter, and if you plan on utilizing an FHA insured loan, then you may want to consider purchasing (making offer, getting offer accepted, and getting an FHA case number) before this all takes place.
The Santa Clarita real estate market is ripe right now, for homebuyers. I say this not to just blow hot air and to erode the letters on my keyboard, I say this because interest rates on home loans have NEVER been lower, and the inventory of homes for sale has seen a sizable increase from it's lows of early 2010 (in Santa Clarita). Add to that equation, a sudden hush in homebuyer activity, and you could have an opportunity to really negotiate a good deal for yourself, what with the lack of competition. Multiple offers were common place for the first half of 2010. Not so much the case, right now. This of course, could all change. Real estate is weird like that.
Call on us, at The Robert and Brian Team, to assist you with any of your Santa Clarita real estate needs. Don't forget to house hunt at or most-awesome local real estate website. Enjoy!
UPDATE:
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