“2015, wow! Everything just got good in 2015″ ~ Tina Mitchell
What an amazing way to start the year. Interest rates are at historical lows once again, it’s unbelievable what the rates are doing and what’s happening right now. Just the bond market, huge increases in the bond market.
Those of you that don’t know how mortgage rates work, they’re directly tied to the Fanny May 30 year bond so as the Bond market is trading higher you will see interest rates move down. Usually the Bond market is opposite of the Stock Market just as what’s happening; last week we saw quite a bit of a drop in the Stock market but we saw the Bond market improve.
What’s happening is the European Justice approved the outright Bond purchases, outright monetary transactions or what they call OMT; it’s exactly the same thing as what we call here QE. Purchasing mortgage-backed securities and what has been causing it is that the Euro has been declining significantly; so European investors are investing right here in the US, buying our treasuries.
Why? It’s not just because our treasuries are offering four times the yield; but the real magic is the currency play. They finally see that this is a currency trade opportunity, since the Euro is getting weaker and will continue to do so, and this is why we in the Bonds rally.
It’s a really amazing time to get into a home purchase, or if you have an existing mortgage, looking at the opportunity to refinance. I have a lot of my clients that bought last year and they are refinancing. The rates are just so low, just huge opportunity right now.
Mortgage Insurance
After the financial crisis that happened in 2008 on FHA loans ( mortgage insured by the Federal Housing Administration, a government agency within the HUD. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.) we saw a lot of negative information coming out with mortgage insurance. (Mortgage insurance is what you have to pay if you’re coming with less than 20% down.)
For HUD, which represents for FHA financing, there is a certain amount of reserves that they needed to have to ensure that they could continue lending and that was the reason behind the mortgage insurance going up and going up significantly. Before the meltdown mortgage insurance was 0.55% x(times) the loan amount and then it went all the way up to 1.35%, consistent increases in that which ultimately affect your mortgage payment and what you can actually purchase on a purchase price.
This is the first time since we have seen the mortgage insurance go up for FHA. It will actually start to go down on January 26, 2015. You are going to want to be locking in on January 26 or after for your FHA case number. The mortgage insurance has gone to 0.85 % monthly. If you are looking at doing the minimum down payment at 3 ½ % on a 30 year fixed rate mortgage.
If you are 15 year higher down payment that’s going to be a different premium, but let’s just talk about what most of you are utilizing FHA for, is for the lower down payment.
If you had a loan amount of $517,500; yes you can get into a home on an FHA loan with a loan amount of $517,500. I’m going to talk about that in just a second here.
Let’s use that example:
- The old mortgage insurance at 1. 35% was $582 a month.
- Now with the decrease in FHA for mortgage insurance at 0.85%
- The new monthly is $366 a month;
- You are going to save $216 a month because of this new great information in news coming out in 2015.
What this is really going to do, it’s going to increase your buying power and that’s really what it’s about, how can we increase your buying power to help you get that home that you want for your family. Getting into the best neighberhoods and getting into the better schools, just having a better home for you and your family.
About $33,000. This is assuming $65 per 10,000 because that’s basically what FHA is running. If you wanted to know what your mortgage payment would be on an FHA loan, minimum down payment for everything, property taxes, insurance, mortgage insurance, your mortgage which is the principal and interest. We’re talking full principal and interest, taxes and insurance, it’s about $65 per 10,000 in price. So if you can save $216 a month with the new mortgage insurance that’s about $33, 000 increase in your buying power, pretty substantial. That’s the first good news for mortgage information for 2015.
High Balance Loan Limit
Now let’s talk about the high balance loan limit. Conventional conforming loan limits throughout the country is $417,000 so when you are getting into conventional financing no matter where you are buying in the country, once you loan amount goes over or exceeds 417,000 it falls out of the standard, conventional, conforming loan limits. But again, after the melt down, Obama actually came in with a temporary loan limit that’s in between our conforming and jumbo and it’s a called a high balance. With high balance that maximum loan amount is going to depend on what county that you are purchasing in.
If we are talking about our county here King County, the maximum has increased to $517, 500.
That’s where that $517,500 figure earlier came from on that FHA example when I was doing the payment comparison for the mortgage insurance.
The FHA maximum high balance follows what the conventional is. So, in King County, you can get into a maximum loan amount of $517,500. That has increased from $506,000. Anything over that just puts you into traditional jumbo financing.
If you were doing a minimum 10% down payment on a conventional loan, again FHA financing, you can do 3 ½ but if you want to get into conventional financing with better terms on a conventional loan than FHA. That means you can purchase a $575,000 home.
If you did a piggy back second, an 80, 10, 10 loan; you can actually buy a $646,875 home, with a 10 % down payment.
What a great opportunity there. I know we are going through a lot of numbers and it may get a bit overwhelming. It is best if you contact your Mortgage Broker to discuss these changes as they relate to your circumstances.
3% Down Payment For Conventional Financing
The 3rd change I want to mention is that 3% down payment for conventional financing has come back, everything just got good in 2015.
Why is this happening? because our economy is recovering. When the economy recovers more creative options come back. No we are not going to get into the nightmare that caused this whole melt down because we are not getting back into stated income loans. We’re not getting back to if there is breathe on a mirror you can get financing.
You have to able to verify that:
- you have employment
- you’ve got income
- you’ve got reasonable credit
To get into a mortgage!
But some of the creative options as far as lower down payments and things getting more affordable is what’s happening. You can now get into a conventional loan with a 3% down payment.
The maximum loan amount has to stay within the conventional, conforming limits, again anywhere in the country that would be 417,000. That means a maximum purchase price with the minimum 3 % down would be just under $430,000.
The great news with this is there is a great opportunity to come in with less than 20% down and not have to pay monthly mortgage insurance. You can do a one time buy out. It is an amazing program and this is going to give you another $30,000-$50,000 in buying power.
Now that the conventional 3 percent has come back you can finance that into your loan, you don’t have to pay for it upfront.
Each of your financial situations is going to be unique and the best way is to just take a look at numbers to see how that comes out, to see what the benefits are for you and what the best program is for you.
Conclusion
If you take anything away from this post is that 2015 is an awesome year;
- Low interest rate
- Lots of great loan programs available
- Lower Mortgage Insurance
- Higher Conventional Loan Amounts
- Lower Down Payment Options
for you to help you secure your dream of home ownership.