Changes by the Federal Housing Authority that went into effect April 1 may motivate some buyers to speed up the process if they are considering an FHA loan.
Yet while many homebuyers are scrambling to take advantage of current regulations, as well as historical low interest rates and prices that could rise, Jim Ruth, senior loan officer with First Cal Colorado, cautions buyers to take their time.
“People should be buying because they want to buy a house,” Ruth said. “A lot of people sometimes will rush it, and they might buy something they don’t really want. When people are coming up on deadlines, such as for the $8,000 tax credit a couple years ago, I had people buying just so they could get that credit.”
One of the factors that Ruth sees is that new FHA regulations dictate that homebuyers not under contract by June 3 will have to pay mortgage interest for the life of the loan, instead of having it drop off once the amount owed is down to 78 percent of the original loan amount.
FHA loans are very tempting now, Ruth said, coming in about a half-point lower than conventional loans and hovering around 3.3 percent to 3.5 percent, but paying mortgage insurance for 30 years can add $40,000 in cost to a $200,000 home over the life of the loan.
“There are a lot of other programs available out there,” Ruth said. “Don’t panic over the changes. It’s important to sit down with your lender about six months before you buy and make sure you are aware of all your options and that your credit is in order.
“If you’re credit isn’t good, it may be able to fixed in as little as six months to a year.”
The Colorado Housing Finance Authority, which First Cal Colorado is affiliated with, has multiple programs available. One of those, the Mortgage Credit Certificate program, is designed for one- or two-person households making less than $79,300, or three-person households making less than $91,100, who haven’t owned a home in the last three years.
The certificate, which is awarded following a class attended by the buyer, allows those purchasing a house greater than $150,000 to receive 20 percent of their interest tax deduction in the form of a credit — an average annual rebate of at least $1,500.
Another program, the CHFA Advantage, is for people who have a 700 credit score or better. It requires them to pay just 3 percent down and, at a slightly higher rate of 4.125 percent, carries no mortgage insurance requirements at all, saving hundreds a month.
“Not all mortgage companies offer CHFA,” Ruth said. “It’s important to ask questions and do some homework before choosing a lender. It may not be the most exciting part about buying a house, but it’s probably the most important.”