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Blake Kleckner

There's No Time Like the Present

Sunday, December 22, 2013 - Article by: Blake Kleckner - DiVita Home Finance - Message

Last Wednesday, the Federal Housing Finance Agency (FHFA) announced that in March a .10 basis points, or .10%, increase in the G-fees, aka Fannie's and Freddie's guarantee fees, or in just plain talk "fees," is scheduled to occur. The FHFA will also be making changes that will require borrowers with poor credit to pay more.

The combined impact of these 2 actions will result in roughly a .14% average increase in the cost of loans. While this may not seem like much, on a $400K loan it will be an extra $560. Go to the link below to get the complete info about this impending change.

You only need to multiply any loan amount times .014 to determine the projected loan cost increase. Rather than pay the cost if it gets too high due to the loan amount, you can opt for a higher interest rate so the additional cost can be absorbed into your loan.

If you have been waiting for interest rates to come down before purchasing, this won't be happening any time soon, if at all, so it's best for you to boy sooner rather than later. If anything, interest rates will be rising throughout 2014, and it would be of no great surprise for them to be in the 5s by April of next year for conventional loans of $417K or less.

Interest rates for conventional, jumbo conforming loans, which are those over $417K up to $625,500 depending upon the area (some areas have lower loan limits) will also increase similarly. They could easily be in the 5s by late January.

To put this into proper perspective, every 1/8th of a point increase in the interest rate on a $400K loan equates to a mortgage payment increase of about $30 monthly. So, you can easily see that an increase of 1/2 to 1 point can make a sizeable difference in the payment each month--$120 to $240 more--as well as reduce the purchase price of the home you can qualify for due to the higher payments.

By waiting, you may be shocked that you can no longer buy a home at the price you were previously told you pre-qualified for. Don't let this happen to you. Take the plunge now!

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