Some Home Buyers Can't Afford to Wait for the Spring Market

An article by Matt Carter in today's Inman News titled, FHA hiking premiums this spring, details FHA changes and mentions two other events which could impact our Spring real estate market.

The Federal Housing Administration won't raise the 3.5 percent minimum down payment requirement for mortgages it guarantees as long as borrowers have FICO scores of 580 or better.

Beginning early this summer, however, borrowers with credit scores below 580 will be required to make down payments of at least 10 percent in order to participate in FHA's mortgage insurance program.

This spring, the Obama administration also plans to raise the upfront mortgage insurance premiums paid by all FHA borrowers to 2.25 percent, up from 1.75 percent now.

The increase -- some of which may later be shifted to annual premium payments -- will help build FHA capital reserves back to statutory minimums and bring back private lending, FHA Commissioner David Stevens said today.

Mr. Carter goes on to mention two other events that could have an impact on home sales

The Federal Reserve will wind down a $1.25 trillion program at the end of March that's helped keep mortgage rates low, and the recently expanded homebuyer tax credit expires for buyers not under contract by April 30 and closing by June 30 (see story).

Although the changes may affect a small percentage of individual buyers, Berkeley Hills Realty retains faith in our local market; a market which has remained stronger than the national averages. This belief will continue to be supported by the high number of cash buyers in the bay area (see story). In addition, Carter quotes NAR Chief Economist Lawrence Yun as stating that he does not expect the "modest tightening" announced today will stall the housing market recovery, given that interest rates remain near historic lows and that the homebuyer tax credit will remain in effect during the first half of the year.

"Any tightening will knock some would-be buyers out of the potential pool," Yun said. "But at the same time, any lax underwriting or FHA insolvency can have more significant future negative ramifications for the housing market."

Useful links:
U.S. Department of Housing and Urban Development Press Release: FHA Announces Policy Changes to Address Risk and Strengthen Finances
Berkeley Hills Realty website
Berkeley Hills Realty tools for home buyers
Berkeley Hills Realty agents