Loan Modification

Housing Recovery Stronger Than Expected: Time to Buy?

By Karen Lawson

HUD Secretary Shaun Donovan noted in a recent news conference that although fragile, the housing recovery is doing better than expected. He also said that FHA loan delinquencies have decreased by13.6% compared to last year. This is good news if you’re ready to buy a home, but are concerned about the economy. Record low mortgage rates and flexible FHA guidelines can combine to offer first time buyers, or anyone short on cash or excellent credit, access to affordable home loans.

FHA Home Loans: Easier Access to Home Loans

The real question is not whether you “should” buy, but if you’re ready to buy a home and your circumstances are right for committing to a mortgage and home ownership. Although others may pressure you about buying a home, doing so before you’re prepared can lead to big trouble. Here are a few things to consider if you’re not sure now is the right time for buying a home.

• Credit scores: Pull your credit scores from the three major credit bureaus before shopping for mortgage loans. Although FHA loan programs are somewhat lenient, actual mortgage rates vary according to credit ratings. Paying off credit card debt and making all of your payments on time can help increase your credit score over time.
• Sufficient savings: Have you saved for a down payment and closing costs? FHA loans require an up-front mortgage insurance premium (UFMIP) of 2.25% of your mortgage amount. Most borrowers roll this into their mortgage amount, but it may not be possible to do the same with closing costs. Adding to your FHA mortgage amount increases your monthly payment, and ultimately, the interest you’ll pay over time.
• Programs for first time buyers: State and local housing assistance programs may provide funds for down payment and closing costs if you’re short. These programs typically lend money as a “silent” second mortgage which requires low or no no payments until you vacate the home you’re buying. Local real estate pros can locate programs in your area.
• Home prices Researching home prices in the area where you want to buy can help you plan for buying a home and getting an FHA mortgage loan. Using free online mortgage calculators helps with estimating affordability, potential monthly payments, and how much you’ll need to pre qualify for a mortgage loan.
• Costs of owning a home: Do you have adequate resources for making repairs and maintaining your home? Property taxes, hazard insurance, mortgage insurance, water, lawn care, and trash collection are examples of expenses you’ll pay when you buy a home.

FHA Lenders Ready to Help

Working with a real estate agent familiar with FHA loans is helpful for finding homes and FHA lenders in your area. Keep a list of questions handy for your real estate agent and lenders. Your real estate agent and mortgage lender can work as a team to make your transition from renting to owning as seamless as possible.

Full post as published by FHA Mortgage Guide on July 13, 2010 (boomark / email).