Charleston mortgage report, mortgage rates, new FHA mortgage insurance premiums
There is some confusion over FHA mortgage changes effective October 4, 2010 due to bill H.R. 5981 signed into law August 11th. The changes include a reduction in the upfront mortgage insurance premium also known as the upfront PMI which is rolled into the loan from 2.25% to 1% and the monthly mortgage insurance premium will rise from .50% to .85% on loans with more than 5 percent down and from .55% to .90% on loans with less than 5 percent down which is most FHA loans since the minimum down payment is only 3.5 percent.
What it means is that the amount borrowed will be lower but the monthly payment will be higher. Here is an example using a 30 year, 4.50%, $200,000 loan with a 3.5 percent down payment. The upfront mortgage insurance payment goes from $4500 to $2000 saving the buyer $12.65 per month. The monthly mortgage insurance goes form $91.67 to $146.20 costing the buyer $54.53 and the net change will be an increased monthly payment of $41.88.
Now, two things for any Charleston home buyer to consider. First, don't rush into a home just to save a couple of dollars due to this change. Just like with the home buyer tax credit, it's more important to find the right home and be able to afford it, not just hurry into a major financial transaction to get a credit or save a couple of dollars.
And secondly, you'll notice that I used 4.50% as an example even though today's current rates are only 4.125%. Now since these are historically crazy low rates, how long can we continue to expect them to stay low. Basically it depends on the economy and depending on whether economic reports are good or bad, rates will go up or down. But even more interesting is whether the bad news is better or worse than expected or if the good news is better or worse than expected.
And that's exactly what happened yesterday with the monthly non farm payroll report. While the headline was fewer new jobs created and the unemployment rate rising, it wasn't as bad as expected. So the stock market went up and bonds went down (which means that interest rates rose).
It's just my opinion but I don't think the economy is suddenly going to turn into high gear and interest rates will soar but I would expect them to increase slightly between now and the end of the year. And the most important thing about low interest rates if you are thinking about buying a home in Charleston is that your affordability increases dramatically with low rates so you can either buy a more expensive home or reduce your monthly payments.