With the appreciation homes are seeing in the greater Seattle – King County area, home owners who purchased their home a couple years ago using an FHA mortgage may now be able to refinance into a conventional mortgage. FHA mortgages are often used when a home buyer needs a lower down payment option or if credit scores are lower. FHA jumbo mortgages offer home buyers lower down payment with higher loan amounts than what conforming mortgages will permit. There are many reasons why someone might opt for an FHA mortgage when buying a home.
Over the past few years, home owners have enjoyed deducting private mortgage insurance (pmi) premiums from their income tax. This is also true for government forms of mortgage insurance (aka funding fee or guarantee fee) with FHA, VA and USDA mortgage loans. This benefit is coming to an end effective on 2014 tax returns.
If you have been waiting for Congress to pass HARP 3.0 or have been previously turned down for a refinance because of lost equity in your home, you might consider trying to refinance again.
Borrowers not wanting to have FHA mortgage insurance as part of their mortgage payment for the life of the loan have about thirty days to take action. This shouldn’t be a reason to panic.
Effective FHA case numbers issued June 3, 2013 and later, FHA mortgage insurance will become a permanent part of the FHA mortgage payment.
Why do I say “SO WHAT?”
UPDATE February 21, 2014: Conventional financing currently has increased the minimum down payment to 5% from 3% unless you are considering the Home Advantage Mortgage Program. Mortgage programs and guidelines change constantly so please check with your local mortgage professional regarding what is currently available for you.
I’m pricing out a scenario for a first time home buyer who’s looking at buying a home priced at $250,000 and they have roughly 3% set aside for down payment plus closing cost. Since they have excellent credit, they are leaning towards conventional financing instead of FHA, which has much more expensive mortgage insurance (upfront and monthly).
Mortgage rates continue to remain at historically low levels. Homeowners who have not recently refinanced may want to contact their mortgage professional to see if they can reduce how much they’re paying on interest.
Something that’s not staying low in the Seattle/King County area is home prices. The Seattle Times reports that in March, home prices are up 20% year over year. The median price for a home sold last month in Seattle jumped to $462,375. This is largely due to a lack of inventory. If you’ve been considering selling your home, now may be a good time.
Here are some of the economic indicators scheduled to be released this week:
Wednesday, April 10: FOMC Minutes
Thursday, April 11: Initial Jobless Claims
Friday, April 12: Retail Sales; Producer Price Index (PPI); Consumer Sentiment Index (UoM)
Also important to note: there has been some confusion as to the recent changes to mortgage insurance premiums on FHA loans regarding when the coverage terminates. FHA mortgage insurance will not become permanent until June 2013 and impacts newly originated FHA loans only with case numbers issued after May 31, 2013.
If I can help you with your home purchase or refinance for your home located anywhere in Washington state, please contact me. Have a great week!