FHA ‘Fee Cuts’ Expected to Boost Home Sales

What type of impact will the Federal Housing Administration’s move to lower insurance premiums really have on the housing market? Housing experts are making predictions that the lower fees could translate into thousands of new home sales this year and next.

The Federal Housing Administration recently reduced its annual mortgage insurance premiums from 1.35 percent to 0.85 percent. According to estimates by the National Association of REALTORS®, the lower rates could result in big savings over time for borrowers. For example, a borrower with a $200,000 mortgage could unlock a savings of nearly $1,000 over the first year. By year five, the borrower may have saved nearly $4,800, and over 30 years potentially about an $18,000 savings.

The FHA’s lower pricing will likely draw thousands of credit-worthy borrowers back into the market, NAR notes. NAR Research has estimated that the fee reduction will price an additional 1.6 million to 2.1 million renters, along with many trade-up buyers. This could result in 90,000 to 140,000 additional annual home purchases, NAR estimates.

Estimates by Moody’s Analytics shows the reduction in the FHA premiums could amount to 45,000 additional new- and existing-home sales in 2015, and that single-family housing starts will rise by 20,000 as a direct result of the FHA reduction in premiums. But the maximum impact of the FHA’s premium cut likely won’t come to fruition until mid-2016, according to Moody’s report. Then, it expects home sales to increase by 100,000 due to the FHA reduction, with 40,000 additional single-family housing starts in 2016 due to it.

Source: “Moody’s: FHA Premium Cut Will Increase Home Sales By 45,000 This Year,” HousingWire (Jan. 28, 2015) and “FHA Lowers Pricing to Reflect Less Risk,” National Association of REALTORS® Economists’ Outlook Blog (Jan. 8, 2015)

FHA Fee Cuts Likely to Help More Home Buyers Qualify

Last week, the Federal Housing Administration announced it will cut its annual mortgage insurance premiums, likely resulting in about $900 in savings for borrowers and potentially opening the door to thousands of new buyers. But there are no further FHA fee reductions under consideration, Julian Castro, secretary of the U.S. Department of Housing & Urban Development, told a crowd at the National Press Club on Tuesday. The FHA decided to reduce its annual mortgage insurance premium fees from 1.35 percent to 0.85 percent because its Mutual Mortgage Insurance Fund for single-family programs was “back in the black.” In his speech, Castro cited National Association of REALTORS® research that estimated that nearly 400,000 creditworthy borrowers were being priced out of the housing market in 2013 due to the high premiums. “We expect our premium reduction to help more than 2 million borrowers save an average of $900 annually over the next three years,” Castro told the crowd. “It will also encourage nearly a quarter-million new borrowers to purchase their first home.” Source: “Castro: No Further FHA Fee Reductions Under Consideration,” HousingWire (Jan. 13, 2015)

Survey Reveals “5 Home Buying Myths”

Overall, today’s home buyers tend to be fairly knowledgeable about the real estate market, but there are still a few points of confusion in the process, a new survey by Zillow of 1,000 potential home buyers finds. 

Here are the five main areas of confusion the survey revealed: 

  • Appreciation: About 42 percent of home buyers believe home values will appreciate by 7 percent a year. Reality: Historically, home values in a normal market appreciate by 2 to 5 percent in a year. 
  • Mortgage insurance: 41 percent of buyers think they will have to purchase private mortgage insurance, regardless of the amount of their downpayment. Reality: Buyers only need to purchase PMI if their downpayment is less than 20 percent of the home’s purchase price.
  • Appraisals: 56 percent of the buyers said the purpose of the appraisal was to determine if a home was in good condition. Reality: That’s the purpose of a home inspection; an appraisal estimates fair market value. 
  • Home owner’s insurance: 37 percent of home buyers said that buying home owner’s insurance is optional. Reality: Lenders require homebuyers to purchase homeowner’s insurance. 
  • Ownership: 47 percent of home buyers said a prospective buyer owns a home after the purchase contract is signed. Reality: The purchase and sales agreement is the beginning of the closing phase, but it can be a long process until they finally take ownership. 

Source: Zillow Inc. 

Other helpful information regarding the Placerville, El Dorado County, CA. regions at: www.dougandbudzeller.com

New “short sale assistance desk”

C.A.R. today announced it has partnered with Fannie Mae on an initiative designed to help REALTORS® quickly resolve issues that may arise after a short sale offer is made on a Fannie Mae-backed loan.

The Fannie Mae Short Sale Assistance Desk (“Assistance Desk”) provides brokers and agents the ability to significantly shorten the wait time for approval on Fannie Mae short sale transactions.  The Assistance Desk also helps real estate professionals with the handling of post-contract issues such as loan servicer responsiveness, the existence of a second lien, or issues involving mortgage insurance.

The Assistance Desk leverages relationships between participating MLSs and their members to collect and submit information to Fannie Mae using a dedicated submission form on the MLS website.   Participating MLSs also provide Fannie Mae with data to improve property valuations, which can help lenders in making quicker approval decisions on short sale requests.  The Assistance Desk expedites the process so that a real estate professional will receive an initial response within one week confirming that the case has been reviewed.

More information at: http://www.car.org/newsstand/newsreleases/fanniedesk/ 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

 

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FHA announces “changes to their Mortgage Insurance”

·         The “upfront” MI (the amount added to the loan amount at closing) is being reduced from the current 2.25% to 1.0% – that’s good news.  Means the client will be starting out with a lower loan balance. 

·         Bad news is that the MONTHLY MI will be going up from the current .55% per year to .85% to .90% per year.  On a $250,000 purchase price, this means approximately $55 per month in higher MI payment.

Implementation date is estimated to be September 7th, meaning all case #’s drawn after this date will have the new MI structure.  So if we have a house identified and it looks like the offer will most likely be accepted, you might want to get a case # on that house for that client and lock into the existing MI structure.  Some clients may opt for the lower up front cost and take the higher monthly payment.