02-21-2011 FHA MIP Increase + Int Rates

Most of us keep waiting for good news to show the recovery is well under way with Real Estate sales soaring and that homes will be easier for which to qualify… Maybe that will be next week!

There are a handful of things looming on the horizon that will result in home buyers paying higher Mortgage payments. Here are a few things prospective buyers need to know going forward:

I. HUD will increase the monthly MIP on FHA loans by 25 basis points, effective with loans taken 04/18/2011.

Ø To make more sense out of this, it is a $21 per month increase on a $100,000 loan amount (assuming a minimum down payment).

II. Dodd-Frank Wall Street Reform and Consumer Protection Act

Ø Effective 04/01/2011, the part where the government limits what a Loan Officer can be paid on a loan goes into effect, and it cannot have anything to do with profitability.

> While you would think this will result in lower interest rates, it will actually result in higher interest rates paid by consumers. If you’d like to understand why, just call me and I’ll explain why.

Ø This will also result in Loan Officers having less incentive to take on “challenging” deals, since they cannot earn more on the deal to reflect the amount of time that needs to be invested in getting someone approved.

III. QE 2 will end late Spring/early Summer.

Ø This refers to the “Quantitative Easing” program where the Federal Government will end up borrowing around $2.5 TRILLION dollars to buy their own Paper to artificially keep interest rates down.

Ø When they finally stop doing this, the Mortgage rates will jump, since there will be far less demand for their Treasuries. Less demand = higher interest rates to attract demand.

With the high levels of apathy amongst today’s prospective buyers, they need to understand the price of choosing not to choose. We’ve already bottomed out on interest rates, so the longer someone waits to buy a home, the higher their payment will be.

Of course, to put an historical perspective on it, prior to the 2000’s, if you could get a 30-year fixed rate anywhere in the 6’s (and that includes 6.875%), you celebrated it. Unfortunately, the 1^st time home buyer today is too young to know that, and they have a big shock coming if they don’t act soon.

Please feel free to forward this to your sphere of influence, prospects or repost on your website, as long as you acknowledge its source (www.govieman.com).

(I know you want to hear very positive things from me, and I have some good stuff coming next week).

Good luck!

Jim CookGovieMan (tm), The ONLY Choice for FHA, VA and ALL Mortgages

Cell (216) 401-1717

eFax (440) 229-3389

www.govieman.com

jcook@thehls.com --- Please note my new email address.The Home Lending Source, fka Consumers Mortgage. We changed our name because we keep growing!