Despite the fact that home prices in most markets remain on a downward trend, the costs of owning a home are going up – mortgagew rates alone have spiked by 20% since early November 2011. [For excellent coverage on this, don't miss Dan Green's recent post on Rising Costs, and KCMblog on Cost v. Price.]
And if that isn’t enough, those using an FHA insured Mortgage to purchase a home (roughly 40% of home buyers in the Twin Cities do) you have more than just rising rates to contend with, courtesy of this little Valentine dropped into my box yesterday from HUD:
“As part of ongoing efforts to strengthen the Federal Housing Administration’s (FHA) capital reserves, FHA Commissioner David H. Stevens today announced a new premium structure for FHA-insured mortgage loans increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point (.25) on all 30- and 15-year loans. The upfront MIP will remain unchanged at 1.0 percent. This premium change was detailed in President Obama’s fiscal year 2012 budget, also released today, and will impact new loans insured by FHA on or after April 18, 2011.”
This means that you’ll pay an extra .25% of your loan amount ($687.50 per year, or $60 per month, on a $275,000 loan) after April 18th 2011. Roughly speaking, that’s the payment equivalent to a .375% rate increase.
The only difference is that we never know when a rate increase is coming – in this case we do, and smart homebuyers will do everything they can to get out in front of this.
More evidence that home buyers in the market now, or who plan to buy this year, need to get a move on – costs are going up faster than prices are likely to fall.
[Advert] Are you an buying a home this spring? Do you know someone who is? If you or someone you know would like to have a frank, open conversation about your options and how rising rates and FHA costs may impact your purchasing power, drop me a line.