Low Mortgage Rates And Housing Demand
Home sales throughout the United States remain strong due to a combination of factors. Rumors of higher mortgage rates in the second half of 2015, the reduction of the FHA annual mortgage insurance premium, the comeback of the 3% down payment conventional mortgage loan program for first time home buyers, and mortgage rates dropping for the past 7 consecutive weeks are all factors in creating a strong housing market with no signs of a slow down. Mortgage rates hit a 22 month low despite rumors of higher mortgage rates and even the Federal Reserve Board announcing they will be increasing mortgage rates this summer. This is not the first time that the Federal Reserve Board has been announcing that they will be increasing mortgage rates. Economists and industry experts do not feel that this is the right time to increase mortgage rates because the economy is not healthy and still has a long way to go. Unemployment numbers may be low, however, many in the workforce has given up looking for work.
Home Prices Increasing Due To Low Inventory
Good deals are becoming harder to find for home buyers. Many homes are selling once it hits the market. Spring being around the corner, signs show that we will have a hot spring market and a shortage in housing inventory. With low mortgage rates and mortgage rates being at a 22 month low, you do not need a real estate expert to tell you where home prices are going. Housing demand keeps on outpacing supply of homes and values throughout the country is increasing. Many homes are experiencing bidding wars, especially in California, Florida, Illinois, Indiana, and Texas.
Low Mortgage Rates Plus Low Down Payment
Low mortgage rates can definitely cause a strong housing market. However, besides low mortgage rates and mortgage rates being at a 22 month low, mortgage lenders are offering low down payment on home purchases and no closing costs through a lender credit. The comeback of the 3% down payment conventional loan on a home purchase for first time home buyers have been a hit. Hundreds of thousands of first time home buyers are inquiring about the 3% down payment home purchase program with no closing costs. FHA loans require a minimum credit score of 580 FICO so home buyers with prior bad credit, prior bankruptcy, prior foreclosure, prior deed in lieu of foreclosure, and prior short sale as well as home buyers with bad credit can now have the opportunity to become homeowners again. FHA is promoting homeownership by making home buyers who do not qualify due to high debt to income ratios to have family members to be added as non-occupant co-borrowers and are also allowing for home buyers with no down payment to be able to get 100% of their down payment gifted by family members. FHA also has reduced the FHA annual mortgage insurance premium from 1.35% to 0.85% which is a 0.50% reduction. That is a lot more buying power for a home buyer.
3% Down Payment Conventional Loan Program
First time home buyers or home buyers who have not owned a home for at least three years with credit scores of 620 FICO or higher can now qualify for a conventional loan with only a 3% down payment. Fannie Mae and Freddie Mac brought back the 3% down payment conventional loan program after it discontinued it in 2014 to promote home ownership.
Many renters are now considering becoming homeowners due to the low down payment requirements, no closing costs due to sellers concessions and lender credit towards a home buyer’s closing costs, and due to low mortgage rates.