FireDream

What’s the Government Doing for Your Mortgage?

In a previous blog, I talked about FHA’s change to a credit-score based MIP (mortgage insurance premium).  This is good news for folks who need the benefits that come with FHA loans (i.e. lower down payments and higher debt-to-income ratios) but who have exercised good sense when it comes to accruing debt and making their monthly payments.

But FHA isn’t just stopping there.  Earlier this year, they rolled out their short-term jumbo loan program.  This change, which was facilitated by the Economic Stimulus Act of 2008, made it possible for FHA to insure up 125% of the median area price instead of 95%, which had been the former max.  The most stunning part is that the FHA will now insure single family home loan amounts as high as $729,750 in some areas.  That’s right-through December of this year, and longer if many mortgage professionals are correct in their assumptions-FHA will take on loans that are nearly three-quarters of a million dollars.

When the new jumbo loan rates were announced, it took most of us in the mortgage industry by surprise.  Prior to March, when the new limits went into effect, the FHA mortgage limit capped at $362,790, meaning that limits more than doubled overnight.  The change means that in some areas at least, FHA is able to equal the loan amounts available for “conventional” borrowers.

The purpose of this change is to lower borrowing costs for homeowners in expensive areas such as California, New York and Florida and provide options for homeowners with fast-climbing adjustable rate loans.

Whether this plan is a good one or not will be left up to you and to financial historians.  But let’s talk about how you can benefit from it.

If you have an adjustable rate mortgage, now is the time to get rid of it.  Interest rates have fallen to the point that it makes good sense to jump to one that is fixed.

If you’re thinking about buying, now’s the time.  It’s a buyers’ market out there and people are willing to deal.  If you safely qualify, why not pick up a great house at a bargain price?  New FHA guidelines mean you can get a larger home with a lower down payment than required by conventional loans.

Refinance, refinance, refinance.  Don’t let those low rates pass you by.  FHA loans-including refi’s-are inherently less expensive because the agency limits the types of fees that can be charged.  (And be sure to save even more with RateWindow™ to maximize savings and improve your long-term financial outlook.)

We’ve learned just how much the market can change in a short time, so take advantage of these programs while you can.  It’s definitely an opportunity to let the market work for you.