Relax, Live a Little…

Seghesio 2-13

Seghesio Vinyards Sonoma Zinfandel 2010 is a favorite.  It slides down the throat and leaves your mouth dazzled. Combining this juice with a few other current favorites makes for another relaxing February evening.  These are the tools necessary to distract me from what is shaping up to be another frothy real estate market in beautiful Sonoma County.  Screw the charts and graphs, just listen to every other conversation at your local coffee house or if you’re bold, ask a local real estate agent how things are going.

Back are the days of multiple offers descending into the laps of what few sellers there are in this market.  10% above asking is a good starting point these days.  Looks like the FED‘s work here is done…or is it just beginning?

Might the FED not be acutely aware of the potential for massive inflation it has created over these past 4 years?  Let’s take a look at some of the changes coming soon to the mortgage industry, changes that WILL affect you DIRECTLY.

The 3.5% down payment on FHA loans could be more expensive for buyers than expected. Beginning April 1, 2013, the mortgage insurance premium will go up by .1% to 1.35% which may not even be noticeable to most would-be homeowners.

The staggering increase will occur on 6/3/2013 when FHA’s policy on the duration of the required mortgage insurance will be increased for the life of the mortgage. It basically doubles the amount of total MIP if the loan is paid to term.

Below is an example with a purchase price of $175,000 with 3.5% down payment at 4% mortgage rate on 30 year term.

FHA Changes

(Regarding the current MIP duration: When the unpaid balance reaches 78% LTV of original purchase, the MIP can be released. In any event though, the minimum time must be five years.) 

Currently, the MIP is required for approximately 9 years 9 months with normal amortization. The new program would require the MIP for the life of the loan. In this example, the initial monthly MIP is $196.88 which decreases based on amortization.

There are buyers that qualify on income and credit who may not have the necessary additional down payment required for 80% and 90% conventional loans. The 3.5% FHA program has provided a great vehicle to get into a home with a minimum amount of cash.

For homeowners that expect to stay in their home for ten years or less, the new changes might not have much financial impact. Homeowners who expect to be in their home long term can refinance with a conventional loan without mortgage insurance once the equity has increased due to amortization and appreciation.  For buyers to avoid these increases, they will need to act now to get the FHA commitment issued prior to these change dates. — The KCM Blog

A recent survey showed that 3 out of 4 future home buyers (who are not first time buyers) plan to move up to some form of a ‘better’ home. The breakdown:

  • Move to a significantly bigger home (49%)
  • Move to a nicer home (17.5%)
  • Move to a nicer part of town (8.6%)

If you or your family falls into any one of these categories, you should strongly consider making the move sooner than later. The ‘cost’ of your new dream house will be determined by two factors: the price of the house and the mortgage interest rate. Both are projected to increase this year.

Prices Set to Increase

In the recent Home Price Expectation Survey105 leading housing analysts called for a 3.1% increase in home values by the end of 2013.

Mortgage Interest Rates Projected to Increase

According to the Mortgage Bankers Association, after reaching record lows in 2012, the 30 year mortgage rates are expected to creep up slowly in 2013 to 4.4%.  Now is a great time to buy the home you always dreamed of owning. However, the longer you wait, the more it will cost.  — The KCM Blog

Time for another splash of vino!!

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