FHA Buyers: Be in escrow by early April or lose $10,000…

I read this article, then did the math.  If you are a FHA buyer and are getting a loan for around $300,000, you will lose about $10,000 of buying power if you wait more than 30 days to open escrow:

 

 FEDERAL Housing Administration mortgages, the government-insured loans that have surged in popularity in recent years, will be getting slightly more expensive this spring.

The F.H.A. announced this month that it was raising the annual mortgage insurance premium for borrowers by a quarter of a percentage point — to 1.1 or 1.15 percent of the loan amount for 30-year fixed-rate loans, and 0.25 or 0.50 for 15-year or shorter-term loans.

The higher premium applies to F.H.A. loans taken out on or after April 18.

The agency called the change a “marginal increase” that would be “affordable for almost all home buyers who would qualify for a new loan.” But industry experts say that some consumers, especially those considered marginal borrowers, may now be prevented from buying or refinancing a property.

The annual premium for 30-year loans was already changed in November, to 0.85 percent or 0.9 percent; the level used to be 0.50 percent or 0.55 percent. (The annual premium for 15-year or shorter-term loans, previously zero to 0.25 percent, did not change at that time.)

“It’s going to make fewer people qualify” for the loans, said Michael Moskowitz, the president of Equity Now in New York. “It’s the equivalent of a quarter-point increase in interest.”

The increase does not apply to F.H.A. loans already in place, or to F.H.A. reverse mortgages or home-equity conversion (HECM) loans.

According to the housing administration, the new rate structure would raise the cost of a $157,000 mortgage, a typical F.H.A. loan amount, by about $33 a month, or $396 a year. (For a $300,000 loan, it comes to about $60/month or about a $10,000 loss of buying power.  That means if you qualify for a $300K loan right now, you better start looking at homes that are selling for $290,000.) The agency requires that all borrowers of loans it insures pay the premium. Consumers with non-F.H.A. loans who put down less than 20 percent are typically required by their lenders to take out private mortgage insurance, to insure the lender against the risk of default.  Read the rest of the article:

http://www.nytimes.com/2011/02/27/realestate/27mort.html?_r=2&ref=realestate

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