Good news on the lender front. First, HUD has reinstated the higher limits on FHA loans that expired 1/1/09. The limit for this government guaranteed loan was $346,250 last year for a single family home. But on 12/31/08, that amount lowered to $271,150.00.
The impact of the decrease would have been less lending options and more expensive loans. Up-front costs could be thousands of dollars more, even if the borrower had near perfect credit. Plus loans over the limit typically require at least a 10% down payment minimum. FHA loans only require 3.5% down payment, and other initial costs are reduced, such as origination fees.
Although FHA doesn’t proscribe interest rates, and lenders are free to set them at whatever they want, the other positive development was interest rates are great right now.
Last week the U.S. weekly average mortgage rates were 5.03% for 30 year fixed, and 4.64% for 15 year fixed. However, according to the Mortgage Bankers Association, rates fell and are now the second lowest level in two decades. As of this week, the U.S. weekly averages are:
30 Year Fixed: 4.96%
15 Year Fixed: 4.5%
As a result, the Mortgage Bankers Association says that loan applications have surged: FHA are up 10.4%, and overall applications are up 7.1%. More information about interest rates and the FHA are available at www.mbaa.org and www.fanniemae.com.
– N. Mark Kramoltz © 2015