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The Good News:
30 Year Fixed Rate home loans sank to 4.78% the week of May 26th, the lowest rate in 2010 and inching closer to the record of 4.71% set in 2009. This, along with the high inventory of available new homes, makes it a super time to be house hunting. A $200,000 loan would mean a principal and interest payment of only $1,046. If taxes, mortgage insurance and hazard insurance typical in the Richmond area are added in, one would have a total monthly payment in the range of $1,300 to $1,450 requiring gross yearly income of about $45,000 to $52,000. There is a spread here because each locality has a different tax rate and each loan instrument has different income to debt ratio requirements.
The Bad News:
FHA (The Federal Housing Administration) has announced that sometime this summer, they will SLASH the allowable maximum “seller concessions” from 6% of the home sales price to 3%. Seller concession rules allow buyers to ask the home seller to pay for a variety of settlement costs such as loan origination fees, points, state and local transfer fees, appraisals, and pre-paid items such as taxes and insurance. Currently, on a $200,000 home, a seller could agree to pay up to $12,000. That will go to $6,000 this summer when the new rules go into effect. FHA is still the best deal in town for cash out of pocket as they still only require 3.5% down. On the $200,000 home this would mean $7,000 versus a Fannie Mae or Freddie Mac that are requiring a minimum 10% down with excellent credit scores.
Both the Good News and the Bad News add up to one thing: Now is the time to strike and buy that new home!
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