You have to love this time of the year. The nearby ski resorts are getting a fresh blanket of snow. The weather is warming up and the bike traffic is increasing on the green belt. Naturally, everyone is preparing for the Super Bowl. Or yeah, let’s not forget the playoffs. These are wonderful times of complacency. We are contently lulled into those day to day activities that are certainly unique to our Valley. All the indoor and outdoor actives in Boise and Nampa that make this place such a wonderful place to live. However, we have a duty to our friends to keep them informed of the looming changes that are about to take place in the real estate industry. These changes will affect everyone in the valley. Now, we can ignore these governmental changes and live our blissful lives or we can act. To act is very simple. All we have to do is talk to the people we know. If we act now we can create an opportunity to help our friends move into homes, stop a friend’s home from going into foreclose and create jobs for the people in our community. So, talk to everyone you know about these events because they affect everyone in this Valley. Here they are……
1. The Federal Reserve will wind down a $1.25 trillion Mortgage Backed Securities Program (MBS) at the end of March. This Federal program helps keep the mortgage rates low. So, yes interest rates will be going up in April! If the interest rates only rise 1% (and who knows where they will end up), the effect could be devastating for the home buyers. The increased monthly payment on a $200,000 loan is $125.00 per month.
2. The expanded homebuyer tax credit expires for buyers not under contract by April 30th and closing by June 3rd. So, the $8,000 First Time Home Buyer Tax Credit is gone. Also the $6,500 Tax Credit for existing home owners is gone.
3. The Federal Housing Administration (HUD) won't raise the 3.5 percent minimum down payment required for mortgages it guarantees, as long as borrowers have FICO scores of 580 or better. That is a good thing. However, they are changing some significant areas which will affect the majority of the home purchasers in our area.
4. FHA allowable seller concessions will be reduced from 6 percent to 3 percent early this summer. This will limit the new home buyers in need of down payment assistance or closing cost assistance. We all know in our market most everyone needs this help.
5. FHA borrowers currently pay an upfront mortgage insurance premium of 1.75 percent, plus annual premiums of 0.5 percent on loans with loan-to-value ratios of up to 95 percent. HUD has raised the upfront mortgage insurance premium to 2.25 percent announced January 20, 2010. They could have raised it to as high as 3 percent without approval from lawmakers so we need to feel like someone is looking out for the consumers’ interest. On a $200,000 home this will increase the buyer closing cost $1,000.
So, what does this mean to you and your friends? Well, we all know that with unemployment at almost double digits, new home construction at almost at a standstill, the state government, county government, and city governments are all making cut backs. The food and beverage business waning, we need to capitalize on whatever opportunities the Federal Government throws our way. This time the FED is taking away. They are taking away the Federal Tax Credit for housing, the down payment and closing cost assistance through FHA and increasing the interest rates. These 3 things will decrease the affordability in our local housing market. Since the local housing market has always taken the lead in moving our local economy out of a recession, we need to support housing now. More importantly, you need to notify everyone you know who can buy a home to go buy one NOW! These home ownership incentives all deactivate in April 2010. This is less than 45 days away. Act Now.