This is a real issue. Don’t be one of the many that gets caught in the trap here. The clamp is about to shut and for some, the opportunity to buy will be gone.
Let’s talk about reality. The average interest rate for a 30-year fixed rate mortgage loan over the past 20 years has been in the neighborhood of 7.4%. Let’s just imagine that interest rates go up 1%, not even reaching that average interest rate for the past 20 years (which incidentally, I believe we could very well approach over the next 12-18 months and it will still be a GREAT interest rate). So, rates go up 1% – that’s a payment change of about $125/month on a $200,000 mortgage loan, the difference between a $200,000 and a $220,000 home loan OR, quite possibly the difference between qualifying or NOT for the home you wanted. $125/month in buying power can make a huge difference and a 1% change in the interest rate environment isn’t the only thing that’s likely to change in the upcoming months.
Will they extend the current tax credit for homebuyers? I can’t say what they’ll do come April 30th. Will they extend the tax credit yet again? It’s so hard to believe that they will…can…yet it’s a possibility. SO, maybe the up to $8,000 will be available after April 30, 2010 and, maybe it won’t. Let’s just throw it into the column for potential losses.
The average first-time homebuyer in today’s market is buying using FHA (Federal Housing Administration) financing for a number of reasons, one of biggest being the ability to get into a home for as little as 3.5% down payment and seller paid closing costs up to 6%. Conversely, there are certainly 3% down payment programs available in the Conventional Loan Market, but they require higher credit scores and have lesser allowable seller contributions.
BUT, oh yes, there’s always a BUT and this is a BIG ONE. FHA guidelines are changing and seller contributions are going down, from 6% to 3%! Using a $200,000 purchase price, that’s 6,000 additional reasons to buy now. Your minimum investment just went up significantly. Do you have an extra $6,000 laying around in your bank account?
We’re up to $14,000 in cash and $125/month and that is just the start. There are a host of other changes and ancillary issues that will come into play that add up to many buyers simply no longer qualifying to buy.
So, don’t get caught in the trap. If you’re ready and able to buy, start now! This is no time to be a fence sitter.

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