You’ve heard the expression “Once in a Blue Moon”. The definition means “very rarely; infrequently,Never” according to Wiktionary. You get the idea…a very rare event! What does that mean to Virginia FHA homebuyers?
Virginia FHA homebuyers have been experiencing that “Once in a Blue Moon” convergence of ideal circumstances when it comes to buying a home right now. Rates have been at historic lows, home prices have never been more affordable in this region, FHA down payments and mortgage insurance have remained relatively unchanged and many first-time and move up buyers who qualify even get a tax credit for purchasing a home!
Well not for very much longer!! Tick! …Tick!… Tick! Can you hear the clock ticking? Time is running OUT! If you have EVER been thinking of buying a home, the time is Right Here, Right Now and here is WHY…
1.) Interest Rates are probably going to rise.
Interest rates have been at historic lows. Why? Because the Federal Government has been aggressively purchasing Mortgage-Backed Securities (MBS). In essence, they have been “subsidizing” interest rates and the result has been what is considered by many as “artificially low” rates. At the end of March, the Fed will end its $1.25 Trilliion program which was used to purchase these MBS. The impact of this program ending on interest rate direction has been widely debated, but many feel that rates will begin to rise. How fast and how much no one can be sure of. What is almost certain is that interest rates will not stay at these historic lows forever. As rates rise, you qualify for a smaller and smaller loan amount…and thus a smaller home. Can you afford to wait? You shouldn’t!
2.)April 5, 2010 will bring sweeping changes to FHA’s loan programs.
FHA, in its recent official announcement, said that they are trying to better position itself to “manage its risk while continuing to support the nation’s housing market”. What does that mean to you?? It means that obtaining an FHA mortgage is about to get tougher. How? Higher fees, tougher rules, tigher credit requirements…
Here are the changes coming with new FHA case numbers assigned on or after April 5, 2010:
- An increase in the Upfront Mortgage Insurance Premium (UFMIP) from the current 1.75% to 2.25% (That’s a .50% increase!)
- A reduction in the maximun allowed seller contribution from 6% to 3% (Cut in HALF!)
- A Congressional request to increase the monthly mortgage insurance premiums
- FHA requirement of at least a 580 credit score to allow the current minimum 3.5% down payment. Credit scores below 580 will require 10% down! (A Big Caution on this one…”Investor Overlays!” Just because FHA allows a 580 credit score as their new minimum benchmark doesn’t mean that the banks (investors) have to accept that. Investors can impose their own higher, more restrictive “overlays” and require even stricter underwriting guidelines and even higher credit scores. Until now, when FHA had no minimum credit score, many investors had already increased their minimum scores to at least a 620…several investors have even higher minimums. Now that FHA is implementing a 580 minimum, one can only wait to see if or how high the investors will raise that current minimum 620 score. How high might they go?)
One other widely speculated change that had been circulated was a possible increase of FHA’s minimum down payment requirement. The good news is that, for now, FHA’s minimum down payment is remaining unchanged and Virginia home buyers can still buy a home with as little as 3.5% down. But we don’t know for how much longer.
What is the bottome line for FHA financing?…credit scores, fees and the costs involved to obtain an FHA loan are going UP! You can still beat the clock…but not much time remains on this one!
3.) The Federal home buyer tax credit is about to EXPIRE! (Probably for good this time.)
April 30, 2010 is the last day for qualified Virginians to have a fully ratified contract in place. That means you have to find the house, write the contract and have the seller agree to your terms…all by April 30th. For first-time homebuyers that tax credit can be up to $8,000 and for qualified repeat buyers up to $6,500! If a contract is not in place by April 30, that money is gone. FREE MONEY! Can you afford to pass up $6,500 to $8,000 dollars?
4.) Home prices are at historic lows in the Northern Virginia marketplace…but are about to rise.
The average sale price levels in Northern Virginia for year end 2009 were very close to those in 2004! Sounds great, doesn’t it? Did we mention… “Historic Lows”? Again, they can’t and won’t stay this low forever. In fact, there is already a shift starting to happen. One of the best ways to track the direction of the housing market is to look at what is called “Months Supply” of inventory.
This is a very simple comparison of the number of available homes for sale vs. the number of homes under contract. Looking at the “Months’ Supply” chart for Dec. 08 vs. Dec. 09 in Northern Virginia, we can see the relative supply levels in 6 different price categories. The overall supply at year end was just 2.6 months in Dec. 09 compared to 4.9 months in 08. The supply has dropped!…especially in the below $500,000 sales prices. That market is beginning to look more and more like a seller’s market.
Multiple contracts are taking place, prices are beginning to stabalize and even increase. Why? The looming expiration of the home buyer tax credit just mentioned has buyers rushing to get their contracts in place before April 30. At the current level of contract activity, the existing inventory in the under $500,000 range could very well be absorbed in as little as two months! All this activity makes for a very robust spring market! We had a lot of pent up buyers due to the snow storms here, so as more competition for well priced homes heats up, as more and more buyers pursue fewer and fewer available homes for sale, the result is that old “Supply and Demand” curve. More demand and less supply equals higher prices. Can you afford to wait any longer?
Tick!…Tick!…Tick!…Can you hear it NOW??
Interest rates will most liketly rise, FHA loans are going to get more expensive and harder to qualify for, the tax credit WILL expire on April 30th and inventories of homes are quickly being depleted in the lower price ranges resulting in either no homes you can afford or paying a higher price for the ones you can.
Historically low rates, historically low prices, the tax credit…all are about to fade away. Don’t look back and kick yourself for not taking action NOW…while there is still time to take advantage of this “Once in a Blue Moon” opportunity!!
Call TODAY and let’s get you pre-approved for your new home purchase. I can be reached at 703-621-7895. The clock is still ticking…
