3 Great Reasons to Buy a Home TODAY!
Posted on | March 20, 2010 | Leave a Comment
Written by: Diane Donnelly
3 Great Reasons to Buy a Home TODAY!
It has been a little while since my last blog post and I want to thank my friend, Monty for pushing me to start it up again! It is a very time consuming practice, but I have a lot of loyal followers who have been asking for my return, so I thank you all!
Buy a home today. Buy a home tomorrow. But, buy the home sooooooon.
REASON #1
The feds have purchased mortgage backed securities (MBS) in an effort to keep interest rates artificially low. They have used 95% of the funds that have been allocated. At the end of March, when the securities have been utilized in full, it is expected that interest rates will rise gradually and become volatile throughout the day(s).
How does this affect you? Let’s run the numbers on a home with a sales price of $375,000. You decide to put 10% down ($37,500) leaving you a loan amount of $337,500. TODAY, the interest rate is 5.875 (for example), and your monthly investment or principal and interest payment is $1,994. AFTER the MBS has run it’s course, the same home with a 6.5% interest rate would leave you with a monthly principal and interest payment of $2,131. That’s a $137/month increase. Doesn’t sound like much, but how long will you be in the home? Let’s assume 6 years. That $137 has becomes $9,864. Think of one thing, just one thing, you would prefer spending $10,000 on outside of your mortgage payment.
Reason #2
The tax credit is set to expire on April 30th. If you are a first time home buyer, you could be entitled to as much as an $8,000 credit on your taxes. If you are a repeat buyer, meaning it is not your first home purchase, you may be entitled to as much as $6,500. Did you know that you do not have to sell the home that you currently live in in order to benefit from the tax credit?
How does this affect you??? You stand to lose up to $8,000. Free Tax Credit - Gone.
Reason #3
The Federal Housing Administration (FHA) is preparing to make some significant changes:
- They are increasing the mortgage insurance premium (MIP) from 1.75% to 2.25% of the loan amount for any loans that are registered after April 1st.
- They are reducing the amount that the seller can contribute from 6% to 3% of the sales price (proposed).
- Minimum credit scores will be introduced. If a buyer has a credit score below 580, he will need to put 10% down as opposed to a buyer with a credit score above 580 who would only need to put down 3.5%.
What does that mean to you?? Let’s look at the worst case scenario - you are a buyer who has run into some bad times and your credit score took a dip and is hovering around 560. Here’s the scene for you - you will need to put down (let’s use the house discussed above with a sales price of $375,000) 10% ($37,500), your mortgage insurance will be 2.5% or $8,437.50 and the seller can only give you $11,250 towards your closing costs. In a more direct comparison - if you bought today, you would need $13,125 to purchase that house. If you wait and the above three proposed guidelines are modified, you will need $48,750. So the cost of waiting is a difference of $36,625. Now consider what you would do with nearly $40,000 besides spending it on a mortgage.Â
I would say these are three very strong reasons to buy a home today. Lock in your interest rates. Close by June 30th. The bottom line is, the cost of waiting far outweighs the fear of taking the leap. If you wait, it will be more expensive monthly, it will be more expensive up front, and you will have lost the tax benefit set to expire in April.
If you enjoyed reading this blog, please subscribe to my RSS feed on my blog homepage. If you have a friend, family member or co-worker who is contemplating a move, please share this blog post with them - they will thank you! In fact, ask them to treat you to a nice dinner with the money they are going to save!!!
Live Well.
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Tags: $8000 tax credit > buy a home > buyer > closing costs > credit scores > Down Payment > First-Time Homebuyers > Home Financing > interest rates > loan programs
Anne Arundel County Short Sales Just Got Less Expensive
Posted on | February 8, 2010 | Leave a Comment
Written by: Diane Donnelly
Anne Arundel County Short Sales Just Got Less Expensive!
A short sale is when a seller sells a home for less than what is owed to the bank or the mortgage company. The difference between what the home sells for and what is owed is considered “forgiven debt”.
Anne Arundel County decided to tax short sales on the sales price plus the debt forgiven by the mortgage company or bank.
However, the Maryland Attorney General’s office said the practice wasn’t supported by state law.
Richard Drain, the county controller, said Anne Arundel County will collect recordation tax on the sales price, rather than the sales price plus the forgiven debt by the lender. This is good news for the buyer! Because recordation taxes are generally split between the buyer and the seller, the amount of cash needed to buy the home has now been reduced a liiiiitle bit.
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Live Well!
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Tags: Add new tag > Anne Arundel County > buyers market > closing costs > Financing > First-Time Homebuyers > foreclosure > lenders > mortgage > short sale
Proposed FHA Loan Changes Make Buying a Home More Expensive
Posted on | February 8, 2010 | Leave a Comment
Written by: Diane Donnelly
Proposed FHA Loan Changes Make Buying a Home More Expensive.
The Housing and Urban Development (HUD), has made the much anticipated, official announcement regarding changes to the  popular Federal Housing Administration (FHA) loan program.Â
The proposed FHA policy changes are detailed below:
1. The up front mortgage insurance premiums will be raised .50 point to 2.25% of the mortgage amount. They anticipate the change to be effective this spring.
2. Minimum credit score will be 580 to qualify for the low 3.5% down payment. If your credit score is lower than 580, you will be required to put a minimum of 10% down. They anticipate the change to be effective this summer.
3. This is a BIG one! They may reduce the closing cost assistance they allow the seller to pay. Under current FHA guidelines, the seller can pay up to 6% of the sales price toward a buyers closing costs. They are looking to reduce the contribution to 3%, meaning a buyer will have to come up with the additional 3% (approximately).
To see the full press release from HUD, go to http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016
If you are looking to move or know someone who is, please forward this update to them as it will be considerably more expensive to buy a home once these changes take place. For example, on a home purchase in the amount of $300,000, once the changes are implemented, a buyer will need approximately $15,000 more assets than they do today. One more reason not to wait to buy your home.
Live Well!
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Tags: buyers > closing costs > credit scores > FHA loan > HUD > sellers
