Over the past several weeks it seems like all we hear about on the news & at the water cooler is the US Debt Ceiling…. Will it be raised?  Will we default? 

You may be wondering…How this is all going to affect mortgage rates.  Well, this past week we saw conforming and FHA fixed mortgage rates rise for the first time in three weeks.  This week, mortgage rates have continued to be guided by the on-going U.S. debt ceiling debate.  

Currently it’s unclear in which direction Congress will vote.  It is Saturday afternoon, just a couple of days to go before Tuesday’s critical deadline and Democrats and Republicans remain deadlocked over whether and how to raise the US debt ceiling – which means we could see the US default on its debt obligations.

Congress must vote to either raise the current debt ceiling ($14.294 trillion) or take steps to reduce debt prior to the upcoming August 2, 2011 deadline…Until everything is settled, it is likely that mortgage rates may be unpredictable.

If Congress votes to make cuts in the budget, we should see mortgage rates fall.  Industry analysts have made it clear that if the United States defaults and the national debt is downgraded, mortgage rates could spike immediately.

On the other hand, if the debt ceiling is raised, we can expect mortgage rates to continue to increase because a higher debt ceiling would trigger further devaluation of the dollar.

Closing soon on a Home in Stone Oak or North San Antonio…FHA Loan Requirements are Changing in April 2011

With all of the changes that seem to be happening so frequently with mortgages these days, it can be hard to keep up!

Well…one more change is heading our way next month for FHA Loans.  It is not a very big change, but if you have the ability to close before the change takes affect, it will save you some money!

The Federal Housing Administration will be increasing the Mortgage Insurance Premium (MIP) that is charged to borrowers on a monthly basis.  The .25% increase will go into affect on April 18th, 2011.

.25% may not seem like a lot, but let’s take look a little further…as we recently discussed in our post Housing Market Statistics for Homes in Stone Oak & Far North San Antonio , the median home sales price  in the Stone Oak & Far North San Antonio area is $339,999.  The max loan amount for FHA loans in Texas at $332,500…so let’s use that price…At that price, the mortgage insurance premium rate will increase by over $69 per month.   There is a lot you can do with $69 a month…fun-filled movie outing for 2 (with all the concession snacks you can stand), or a casual dinner out, or maybe extra gas for your tank or groceries for your fridge. 

The bigger picture…$69 per month is almost $830 per year…what could you do that?  In fact, with most FHA loans requiring the borrower to pay a monthly MIP for the first five years, you would be looking at saving over $4,150 over that 5 year period!

Different variables will affect your MIP, such as down payment amount & loan-to-value ratio.  Your initial down payment will also paly a part in determinig how long you will be required to pay mortgage insurance.  Since everyone has their own indivual & unique financial situation so it’s important to let a qualified Loan Expert help you through the process & make sure that you have accurate infomation.

If you would like more information on mortgages, let us connect you with a Loan Expert today…

www.ZarsAndRogers.com

(210) 209-8711

So…the headlines are all over the place…”Mortgage Rates Jump to 6-Month High!”

Sounds alarming, right?

Well…let’s take a look.  Ok, so yes, rates on the 30-year mortgage averaged 4.61% for the week ending Dec. 9, up from 4.46% last week.  And yes, it’s the fourth week in a row that the mortgage rate rose.

However, they are still lower than they were 1 year ago at an average of 4.81%.  And, 1 year ago, the headlines were quite different…”Mortgage Rates Drop to Record Lows!”  And, 1 year ago, buyers were all in a fenzy to try to take advantage of the historically low rates!

So, right now is still a great time to take advantage of historically low rates…They are just not quite as low as they have been earlier this year. 

General improvement in the economy over the last several weeks has definitely had an influence on the rise in rates & this improvement is expected to continue through 2011…meaning, it is very possible that rates will continue to rise as well. 

What are you waiting for?

www.ZarsAndRogers.com

By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.

Here are six surefire ways you can get your finances in order before you buy a home.

Homeownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.

Instead of just taking out the biggest mortgage a lender qualifies you to borrow, consider how much you want to pay each month for housing based on your financial and personal goals.

Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?

Still not sure how much you can afford? You can use the same formulas that most lenders use, or try another of these traditional methods for estimating the amount of mortgage you can afford.

1. The general rule of mortgage affordability

As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.

To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.

2. Factor in your downpayment

How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.

The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

3. Consider your overall debt

Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.

Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.

4. Use your rent as a mortgage guide

The tax benefits of homeownership generally allow you to afford a mortgage payment-including taxes and insurance-of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

Determining how much house you can afford is an essential step in the home buying process and should be done before searching for a home.  FHA financing has increasinly become more popular as you can put as little as 3.5% down and the credit score requirements are lower than conventional as well.

Visit www.Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

What are your thoughts?