Prairieville buyers have plenty of reasons to buy a great house in Ascension Parish or anywhere in the Greater Baton Rouge areas. After all, homes are plentiful and well priced, the interest rates are low, and of course, the home buyer's tax credit is in effect through April 30. Yesterday, the FHA made an announcement that impacts anyone who buys after the tax credit has expired. The best advice to potential home buyers is to buy now, if you can can to beat the FHA clock.
FHA has always been a good financing option if you less downpayment in hand and if your credit score was a bit lower than what some banks liked. Over the last few years, FHA has written almost 30% of the loans (up from 3% back in 2006) and has suffered from rising delinquencies. The agency now must build its reserves and keep FHA-insured financing alive and well for homeowners. HUD Secretary wants borrowers to "have more skin in the game" as a way to reduce future defaults.
Some of the new rules apply to lenders who must now increase their reserves and practice more responsible lending practices. These are effective immediately. So what are the new rules that affect buyers?
Mortgage Insurance Payment (MIIP) will increase from 1.75% to 2.25% of the one and be added to the balance at closing. This will go into effect April 5, 2010.
Credits scores must now be at least 580 if you want to qualify for a 3.5% down payment. If your credit score is lower, you must come up with 10%.
Sellers will only be able to contribute 3% to the closing costs, as compared to 6% now.
These changes are reasonable, but they will cost new buyers more. All three changes will be effective by late spring-early summer which means those who buy before April 30 will reap some benefits of the tax credit and be able to go by the old rules (except for the MIP increase effective 4/5/10.) Currently, interest rates are low but expected to rise by late spring, so buyers will benefit from that as well. After that, if your credit score is low, you may have to save longer to get your downpayment in order, while all FHA borrowers will pay more MIP and closing costs.
If you are ready to buy a home, call Sandy's Team to discuss your home buying plans. Sandy and her team can find you the perfect place to call home in the new year in Greater Baton Rouge area, including Baton Rouge, Prairieville, Gonzales, Denham Springs, Watson, Walker, Central, Greenwell Springs, Zachary, Baker, Port Allen, Brusly, Geismar, and St Amant. We can also you answer any questions you might have about the home buyer's tax credit - $8,000 for first time buyers or $6,500 for repeat buyers.