MARKET UPDATE - SEPTEMBER 2010

HOW LOW CAN THEY GO

Mortgage Type      Interest Rate      APR

30 Year Fixed       3.875%             4.005%
15 Year Fixed       3.500%             3.729%
5/1 ARM               3.000%              3.018%

Interest rates as of 09/01/10. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

FHA STREAMLINES CONTINUE TO SURGE

If you currently have an FHA mortgage with a rate of 5.000% or higher, you may be able to refinance with no appraisal, and little or no closing costs. The recent drop in interest rates have caused an influx of borrowers refinancing to take advantage of the FHA Streamline refinance option. Call today if you have an FHA mortgage at 5.000% or higher. 480-368-2000.

FHA NEEDS CASH

In an effort to increase cash reserves, FHA is modifying the upfront mortgage insurance premium and monthly mortgage insurance charge. Currently the upfront mortgage insurance premium is 2.25% of the loan amount, which is rolled into the base loan amount. The current monthly mortgage insurance fee is .55%, which is part of the monthly mortgage payment.

Effective October 4th, 2010, the upfront mortgage insurance premium will be reduced from 2.25% to 1.0%. The monthly mortgage insurance fee will be raised from .55% to .85% - .95%; which will vary based on certain risk factors of the file.

Below is an average effect the changes will have on borrowers payments after October 4th.

Loan Amount      Current Payment      New Payment      Annual Increase

$100,000             $563.92                      $582.58                $223.92
$200,000             $1,127.84                   $1,165.17             $447.96
$300,000             $1,691.76                   $1,747.76             $672.00
$400,000             $2,255.67                   $2,330.34             $896.04

*Numbers based on a 4.5% interest rate.

The changes to mortgage insurance is equal to an approximate 0.375% increase in interest rate.

This will impact some borrowers’ ability to purchase a property after October 4th, or help drive down home values further.

NATIONAL HOME PRICES UP FOR THE YEAR

“National home prices jumped a substantial 3.6% in the past year, according to the S&P/Case-Shiller Home Price Index released on Tuesday. Prices also climbed 4.4% in the second quarter compared with a 2.8% plunge in the first quarter.” – cnnfn.com

The tax credit is the largest contributing factor for the increase in home prices. Industry insiders predict that home prices will level off, and potentially see a decline in the coming months, now that the tax credit has expired, and employment is not dramatically improving. Without another stimulus from the Federal Government, the housing market will remain shaky for the foreseeable future.

HOME SALES TAKE A BEATING

Home sales hit a 15 year low.

“Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.” – cnnfn.com

TAX CREDIT 2010 & DOWNPAYMENT ASSISTANCE

The housing market is on the slide, and there is no hope in the foreseeable future; but there are rumors of help on the way.

A new buzz is stirring about the possibility of a new Government tax credit for home buyers to once again kick start the housing market. Numbers are now surfacing, and it is apparent that the tax credit had a much bigger impact on housing than many critics of the tax credit claimed.

Did someone say “Downpayment Assistance?” H.R. 600 FHA Seller-Financed Downpayment Reform Act of 2009 is not dead; not yet. Downpayment assistance allowed the seller to contribute the buyer’s minimum downpayment on FHA mortgages and was eliminated a couple of years ago when there was a push for everyone to have “skin in the game.” Downpayment assistance allows borrowers to essentially purchase a home with no money down. With the current housing market sputtering to a standstill, downpayment assistance may be making a come back.

If either the tax credit or downpayment assistance resurfaces, the housing market will once again erupt with new buyers coming off the fence and out of the woodwork. Yes, it may just be a short term Band-Aid, but the Government will want to stop the bleeding before there is hemorrhaging.