Yesterday congress passed H.R. 5981 which will give FHA the authority to change their annual and monthly mortgage insurance premiums. The bill passed very quickly and the changes that are going to take place will be implemented on September 7th with all new FHA case numbers being pulled on and after that date. Please take note that the September 7th date correlates to pulling FHA case numbers, not contract dates. 

Want to read more:

http://www.washingtonpost.com/wp-dyn/content/article/2010/08/05/AR2010080506663.html

The changes are as follows: FHA will be decreasing the Upfront Mortgage Insurance Premium from 2.25% to 1.0%. They will be increasing their monthly mortgage insurance premium from 

.50 - .55 to .85 - .90 depending on the combined loan to vale ratio (LTV's <=95% will increase to .85 and LTV's > 95% will increase to .90)

Let's take a quick look at how this will affect a homebuyer's mortgage:

* Reminder: The maximum FHA loan limit in high cost areas of WA are $567,500 and high cost areas of CA is $729,750.

* Buyers who were pre-qualified on a FHA mortgage loan type previously to the change date of September 7th, 2010 should be re-qualified to make sure the increase in monthly mortgage insurance payment will not effect their qualifications. 

Furthermore, we should start seeing interest rates creep back up within the next couple of weeks. How does that affect a homebuyer's mortgage payment? Let's look:

The increase in rate could make the difference between the buyer qualifying or not qualifying and having to come down in price for a lesser home! Pass this information on to anyone you know who is thinking about buying a home.

If you are a home buyer and are "on the fence" or are waiting to make a decision, be aware that if your FHA case number is pulled after September 7th, 2010, it will cost you more in your monthly payment due to these changes (in addition to the incredible rates will NOT last!)

As always, if you have any questions or need to be pre-qualified, please feel free to contact me at (206) 909-3930 or michelle.coolidge@cobaltmortgage.com. I'm NEVER too busy for you and always look forward to hearing from you. Have a blessed weekend!

Michelle Coolidge

We believe very strongly in the benefits of homeownership. Over the last few weeks, we have been addressing some of the more questionable reasons people have been giving for not buying a house.

We will cover the last reason today. Dumb Reason #5: You can’t trust a real estate professional to tell you the truth.

This one always gets me upset. Just because someone is in the business of helping you find your next home or helping you arrange financing doesn’t mean they will just tell you anything just to ‘get you to buy now’. Are there unscrupulous people in the real estate business? I’m sure there are. Just like there are immoral people that have become police officers, doctors and even clergy.

However, most real estate and mortgage professionals are good, hardworking members of the community dedicated to helping families attain their housing goals. Are they saying that this might be the best time to buy a home in the last 50 years? The knowledgeable ones are saying just that.

Why? Let’s not take their word for this. Let’s step away from the agents and loan officers and see what others are saying:

“It’s a great time to buy a home. With the real estate crash, prices are way down and mortgage rates have never been lower.”

An article U.S. News and World Report (July 2, 2010)

“It’s the best time to buy a house in America.”  

A CNBC article quoting John Paulson, #45 on the Forbes list of the world’s wealthiest billionaires (June 25, 2010)

“We want to point out that the downside of investing in housing right now is about as low as you will ever see.”

John Burns, CEO of John Burns Real Estate Consulting, in a Housing Wire article (July 7, 2010)

Probably the best people to ask if buying a home makes sense are the people who currently own homes. A recent national poll commissioned by Bankrate.com found:

Ninety percent of homeowners say they don’t regret buying their home despite a nationwide tsunami of foreclosures, short sales and loan modifications.

The next time a real estate professional explains to you that it makes sense to purchase the house you just feel in love with, don’t question yourself or them. They are giving you great advice.

Thanks to Steve Harney and our friends at KCM for this post!

Interest Rates are "crazy low" and just is such an amazing time to look at purchasing (or perhaps refinancing) a home. Below you will see two questions that we are asked a lot about interest rates over the past week - I think you will find the information interesting! 

Question #1: Can rates go even lower? 

It is possible. But, I would expect a correction in the very near future, possibly even this week. Meaning, rates could bump up before heading back down. But, why be greedy when rates are at all time lows?

Question #2: What is the difference in a 4.25% rate and a rate of 6%?

6% is a pretty normal rate in a normal economy. Just how good are rates now? On a $200,000 loan, the difference in 4.25% and 6% is $213 per month! The 6% rate produces a payment of $1,193 vs. a $980 payment at 4.25%, a difference of 17.85%!

If you are wanting to move and have budgeted $1,500 a month for principal and interest on your new home (assuming a 20% down payment), you can buy a home today in the amount of $382,500. Compare this to when rates are at 6%: You can only afford a home in the amount of $314,375! 

So, where rates are today, you can buy $68,125 more home - a difference of 21%!

Keep in mind, this does not take into account inventory levels and the possibility of getting a great home at a much better price today than you might have a couple of years ago. 

Bottom Line #1: It has never been a better time to buy a home!

Bottom Line #2: It has never been a better time to look to see if refinancing is right! 

If you need help determing if now is the right time for you to purchase a home or refinance your existing home, feel free to email me at michelle.coolidge@cobaltmortgage.com or call me at (206) 909-3930.  I'm more than happy to help you look at your individual situation and help you understand what may, or may not, make good financial sense for you!

Have a blessed week!

Michelle Coolidge 

Weekly we have been covering some of the dubest reasons given for not buying a home.  Today we will cover the fourth reason today: Dumb Reason #4: Never buy a house while prices are falling.

Most people would agree that it makes no sense to purchase any item if you know that prices are falling. Housing would seem to fit into that overall rule. However, there are a couple of other considerations one should think about before deciding against purchasing a home in today’s market.

If you are a regular reader of this blog, you already know that I feel strongly that the value of a home is determined by much more than the financial aspects of homeownership. The added comfort, security and sense of community in owning a home should also be considered along with real estate’s role as an investment tool.

To answer the reason given today, I will only look at the home from a straight financial angle however. How can I defend the purchase of an item that will continue to lessen in price?

COST vs. PRICE

When we purchase any big-ticket item, we should always look at cost not just price. Unless you will be buying all cash, you must take into consideration the expense of financing your purchase. It is that expense combined with the price that will determine the cost of the item. Obviously, when talking about a real estate purchase, the expense of financing is the mortgage interest rate.

Let’s take a look at how interest rates impact the monthly cost of a home.If prices go down but interest rates rise, it could mean an actual increase in monthly cost. Look at the chart. Prices would need to come down 10% to make up for a one percent increase in mortgage rates. You could decide to wait on your purchase based solely on price. However, if you think that interest rates could increase in the near future, it probably makes more sense to purchase now.

THE FUTURE OF INTEREST RATES

Interest rates are currently at historic lows. If we look at interest rates since 2000, we find that the average monthly rate was 6.29%. That is more than one and one-half percentage points higher than where they stand today. Though experts are pulling back on their original predictions of 6% rates by the end of the year, there is growing concern that rates will start to rise. Bankrate.com does a weekly survey of analysts to determine how many think rates will increase in upcoming months. The graph below shows that the number expecting rates to rise has been trending upward over the last two months:

When considering whether it makes financial sense to purchase a home right now, make sure you are considering the cost not just the price.

Dumb Reason #3: Limited mobility is harmful to the country.