This informative post comes to us from our good pals at utahcribs.com Check out their blog for some interesting and timely advice!!
Interest Rates WILL RISE, the question is WHEN. Currently FHA is tightening even further their borrower qualifications. Soon borrowers will need at least a mid 600’s score to still qualify for the 3.5% down program; if not they will be forced to put 10% down. Furthermore 2 things are changing with FHA: # 1 seller gifted funds max amount will be lowered from 6% to 3% AND upfront mortgage insurance is going from 1.75% to 2.25% of the loan amount. All this is being put into action so that FHA can build their reserves account as they had vastly increased their market share. Simultaneously bonds are expected to raise and perhaps the largest factor in mortgage interest rates is the fact that the government has been subsidizing the purchase of mortgage backed securities; this will go away in April.
As these three things converge you can be SURE of one thing: Interest Rates WILL GO UP. The cost to buy a home on a monthly basis WILL GO UP. The things still in question are:
# 1 WHEN, if all this happens SOON how long will it take to directly effect MTG. RATES? My guess, as soon as June, as late as beginning 2011.
# 2 WILL this effect CAUSE housing prices to fall even more? My guess, under $300K in Salt Lake City, NO.
The math is simple. If rates rise 1.5% (as many experts predict) then the average priced home in SLC (Currently $221K) will cost you $210.00 MORE a month. OR put another way, rates go up 1.5% you will spend $100 more a month PER $100K you finance.
This can make a marginal difference; think about it! Many are fence sitting thinking the house they want may still come down $50K. Well if you wait and really do save $50K it may still cost you hundreds more a month in RATE.
IT really comes down to finding that sweet spot between price and rates and the bottom. I am an expert and watch it everyday…..so want my honest opinion? Rates are as LOW as you will get NOW, and prices under $300K are as low as you can get. Best time to buy for price and rate: NOW. Once again. Right now you can own the average priced home in SLC at $211K with 3.5% down for $1095 a month. And that price will get you a nice home around 2500 square feet with a 2 car garage in a good neighborhood in the south west end of the valley! HEY, believe me…..I know the market is BAD, I live eat and breath it……but is there anyone out there that REALLY BELIEVES it will get better than that???
