This is the best time, EVER, to buy a home. Right now, this month. And it may be the best time to sell in this market as well. We all know about the large number of homes on the market, low mortgage rates, and cheap prices. However, a big part of that is changing and soon.
FHA mortgage insurance is increasing next month from .9% to 1.1%, a 20% increase in mortgage insurance. And mortgages themselves will be changing. Mortgage requirements will become significantly tougher. This may mean higher down payments and higher credit scores. There is serious consideration in Washington of returning to the days when higher down payments were the norm. The Obama administration is interested in increasing Fannie and Freddie-backed loans to a 10% down payment minimum. Sheila Blair, chair of the FDIC, proposes 20% down payments. Many lenders in the conventional market are already there.
What about FHA? FHA funds come with caveats i.e. tax impounds, forced insurance, MIP fees paid in the beginning, and higher interest rates. So if a borrower puts down 20% or more on a non-government backed loan, the rates are usually lower, impounds are not required, and mortgage insurance is illegal. We are creating a new sub-prime market where buyers with less down must pay extra fees.
The Obama administration and Congress are looking at proposals to change the secondary mortgage market as well. What they decide to do could affect the availability and affordability of mortgages. If they do it correctly, fixed-rate financing at affordable prices will remain widely available. If they are not correct, and this is the government we are talking about here, affordable financing for middle-class households will be very difficult.
The bottom line: Now, right now, is the time to buy. Even if housing prices sag further increased fees and expenses in mortgages will wipe out those savings. And now is the time to sell. Buyers can easily obtain mortgages to buy your home today. That may not be true much longer.
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