Cheap Mortgages Are Gone!
Posted on February 19th, 2011
The last few months have really seen a change in the cost of borrowing money for a home. Here’s what has happened:
The interest rate increase of .7% in just a few months’ time dramatically affects the qualification amounts for buyers and has a strong impact on monthly payment. Buying power could be reduced approximately $15,000 on a $200,000 loan or the payment may go up by around $80 per month.
See: http://www.freddiemac.com/pmms/ http://www.freddiemac.com/pmms/pmms30.htm http://themortgagereports.com/4913/homeownership-costs-30-year-fixed http://kcmblog.com/2011/02/11/the-cost-of-waiting-for-prices-to-fall/
The FHA insured mortgage, which was used in 30% of home purchases in the Twin Cities in the 2nd half of 2010, will see the mortgage insurance premium rise to better account for the loan losses suffered by FHA in recent years. This increase in cost will add another $40 per month to a $200,000 loan or drop buying power by close to another $8000.
See: http://www.behindthemortgage.com/2011/02/fha-mortgage-insurance-costs-going-up-on-april-18th-2011.html http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-013
Put together, these increases to the costs of mortgages dramatically change the affordability of homes and with additional interest rate increases being forecasted by many in the industry, buyers who have waited to see if house prices would decline further have in fact seen house payment costs increase and are likely to see additional increases this year.
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Filed under Real Estate Trends |