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HUD Announces Policy Changes for FHA Mortgage Loans

March 1, 2012 by Leave a Comment

February 27, 2012
HUD No. 12-037
WASHINGTON – “As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today announced a new premium structure for FHA-insured single family mortgage loans.  FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount.  Upfront premiums (UFMIP) will also increase by 0.75 percent”. 

“The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent.  This change is effective for case numbers assigned on or after April 1, 2012.  FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500.  This change is effective for case numbers assigned on or after June 1, 2012″.

“The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount.  This increase applies regardless of the amortization term or LTV ratio.  FHA will continue to permit financing of this charge into the mortgage.  This change is effective for case numbers assigned on or after April 1, 2012″.

In addition to the announcement by HUD above,  there will be a change in Seller Concessions finalized in the near future. The proposed rule limits concessions to 3 percent or $6,000, whichever is greater. It also limits acceptable use of concessions to borrower closing costs, prepaid items, discount points, the FHA Upfront Premium, and interest rate buydowns. The seller concession cannot exceed the actual closing costs prohibiting cash to the borrower at closing. Comments are due March 26, 2012.

Published  January 30,2012 

FHA Buyers Need to Act Now

to Save Money on

!

On January 20, 2012, the FHA announced policy changes for FHA Mortgage Loans which will have a financial impact on many home buyers, and will also affect many home sellers whose property appeals to FHA home buyers. The proposed policy changes for FHA Mortgage Loans will increase the Mortgage Insurance Premium(MIP), relate the FICO Score to minimum down payment requirements and reduce the allowable seller concessions from 6% of the sale price to 3%.

Upon origination of a FHA Mortgage, there is a fee charged to the buyer commonly referred to as UFMIP (Up Front Mortgage Insurance Premium).  This Up Front Mortgage Insurance Premium is added to the original mortgage loan amount and is financed over the length of the loan. The home buyer’s mortgage loan payment is then calculated based on the increased loan amount(Initial Mortgage Loan + UFMIP). The Upfront Mortgage Insurance Premium payments go into an escrow account set up by the U.S. Treasury Department and the funds are used to protect the government in case the borrower defaults on the FHA Mortgage.

Currently, this UFMIP fee is 1.15% for FHA Mortgages with less than 5% down and 1.1% for for down payments over 5%. The FHA announced that it plans on increasing this up front mortgage insurance by .5% , and to go into effect in the Spring. That is an increase of $1,000 on a $200,000 mortgage loan. FHA home buyers generally finance the Upfront Mortgage Insurance Premium and it is added to the buyers original mortgage. Monthly are then based on the total of the original mortgage plus the financed Upfront Mortgage Insurance Premium. In other words, a FHA home buyer’s mortgage payment will be higher once this proposed increase in the Up Front Mortgage Insurance Premium becomes effective..

The FHA is also proposing a change in required FICO Scores requirements as they relate to down payment requirements. New borrowers will be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. Buyers with less than a 580 FICO score will be required to put down at least 10%. This change will be posted in the Federal Register in February  for comments. Early Summer is the planned date for implementation.

Another planned policy change is that of allowable seller concessions. Currently at 6% of the sales price, the FHA is planning on reducing the amount of seller concessions to 3%. This change will be posted in the Federal Register in February  for comments and early Summer is the planned date for implementation.

However, there may be further consideration and change to this proposed change by the FHA due to reaction from real industry professionals. There is the possibility that rather than proposing an across the board reduction of seller concessions to 3%, consideration may be given to perhaps allowing 4% or 5% on smaller loans, 3% on loans above  some set sales price limit or perhaps setting a maximum dollar cap on seller concessions rather than a percentage cap.

Current policy allows a seller is to contribute 6% their sale proceeds to help with the buyer’s closing cost. While that amount may be excessive for closing costs and prepaids in some market areas, a change to 3% will have a negative impact on many buyers seeking a FHA Mortgage. Due to historically low and favorable home prices, many buyers are in the market to purchase a home who have the required 3.5% down payment and have sufficient income to qualify for the mortgage payment, but do not have the additional savings for real estate closing costs. There needs to be some compromise in this proposed change in sellers concessions.

Click the Link below to read the article.
HUD Announces Policy Changes for FHA Mortgages
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 The above article,“HUD Announces Policy Changes for FHA Mortgage Loans”, was written by David Fialk, REALTOR, Broker Owner, Choice Realty Co., , New Jersey and regularly posts real estate articles of interest for home buyers, home sellers and home owners.

 David can be reached via email or by phone at 732-283-3400 or at www.DavidFialk.com.

 Licensed since 1971, David has helped over 1800 families move across town, across the state and across the country and  specializes in the towns of  Iselin, , , Woodbridge, Avenel, Fords, Sewaren, Port Reading, Keasbey, Carteret and Metuchen in Middlesex County, New Jersey.

 Planning on purchasing real estate? Thinking of selling your home? For real estate information ”You Can Rely On, Contact the REALTOR You Can Rely On”.

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Filed Under: Down Payment Requirements, FHA, Mortgages, Real Estate News

Real Estate Sale Statistics Iselin, New Jersey

January 21, 2012 by Leave a Comment

Real Estate Sale Statistics in , New Jersey

Obtaining reliable information regarding real estate statistics in Iselin, New Jersey can be important to home buyers interested in buying a home in Iselin, but they can also be important for Iselin homeowners, whether thinking or planning on selling their home or not! It is easy to understand why obtaining reliable real estate sale statistics in Iselin would be important for someone interested in purchasing or selling a home at the moment or in the very near future. But why would real estate sale statistics be valuable information for a homeowner not planning on selling?

Real estate values affect real estate taxes. The possibilty may exist for a Tax Appeal, and the potential to obtain a reduction in real estate taxes. Wondering if a tax appeal is possible? Contact your Local REALTOR first to obtain information regarding the current value of your home and then speak with the local Tax Assessor. Many homoeowners are  obtaining real estate tax reductions!

Every day there are news media reports providing real estate sale statistics about the current real estate market . However, real estate sale statistics vary throughout the Country, for the Northeast Region, for the State of New Jersey and for Middlesex County. Economics 101 states that what is true of the whole, is not true of the parts. Real estate is local! Real estate values vary from one town to another and from area to area within the same town.

The current real estate market provides many opportunities for home buyers, and for many current homeowners who have plans to sell their current home and purchase another one. 

View real estate sales statistics for Iselin from 2002- 2011 as reported by the Middlesex county Multiple Listing System.

Iselin, New Jersey Real Estate Sale Statistics, 2002-2011

 Would you like to view sale prices of sold homes in Iselin during 2011? Click here .

Would you like to view real estate sale statistics for 2011 as compared to 2010 for all towns in Middlesex County. Click here.

____________________________________________________________________________________________

The above article,“Real Estate Sale Statistics in Iselin, New Jersey”, was written by David Fialk, REALTOR, Broker Owner, Choice Realty Co., Iselin, New Jersey and regularly posts real estate articles of interest for home buyers, home sellers and home owners.

David can be reached via email or by phone at 732-283-3400 or at www.DavidFialk.com.

Licensed since 1971, David has helped over 1800 families move across town, across the state and across the country and  specializes in the towns of  Iselin, , , Woodbridge, Avenel, Fords, Sewaren, Port Reading, Keasbey, Carteret and Metuchen in Middlesex County, New Jersey.

Planning on purchasing real estate? Thinking of selling your home? For real estate information ”You Can Rely On, Contact the REALTOR You Can Rely On”.

 

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Mortgage Interest Rate at 50 Year Low

August 20, 2011 by Leave a Comment

On August 18, 2011, FREDDIE MAC  announced that the 30 year fixed mortgage interest rate averaged 4.15%(with 0 .7 points), down from 4.32% the previous week and breaking the previous low of 4.17% set on November 11, 2010. The 15 year fixed mortgage interest rate averaged 3.36%( with 0.6 points), as compared to 3.50% the previous week.

With at historic lows, not only is home ownership becoming even more affordable for home Save Money Home Purchasebuyers, but now there is even more opportunity for current home owners to make the decision to refinance their current mortgage loan. Take a look at the benefit of just a .25% drop in the mortgage interest rate.

$200.000 Mortgage Loan Monthly Principal and Interest Payment

4.25%

 

4.5%

$983.88

30 Year Loan

$1,013.37

$1,504.56

15 Year Loan

$1,1529.99

Want to calculate on your own? Here is a Mortgage Calculator for you to work with.

In selling real estate for 40 years now, I have not sold a home where interest rates are as low as they are now. I did just close on a sale Thursday where the buyers original mortgage application was for 4.75% and the loan closed with a mortgage interest rate of 4.375%.

Not only are there monthly mortgage payment savings for home  buyers due to the low mortgage interest rates, but there are also huge savings in the purchase price of a home today compared to 2006. There is no denying that real estate values have dropped in the past few years, some towns and areas more than others. A lower purchase price equals a lower mortgage and a lower monthly mortgage payment.

Take a look at the year to year comparison of  average sale prices for one family homes in Middlesex County, New Jersey.

Middlesex County Sale Statistics_2006_6.30.2011

Yes, there are substantial savings for home buyers with interest rates being at historic lows and real estate values reaching 2003 levels!

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The Impact of Mortgage Interest Rates!

May 21, 2011 by Leave a Comment

Should Buyers Pay More Attention to
or
Timing the Home Purchase When Hit Bottom?

The Dilemma: Buy Now or Wait?

Home buyers are searching for the answer. 

Many buyers are looking at homes week after week. They see home prices below price levels of last year, and much below the values of years past. They are viewing homes with that are affordable due to the historically low mortgage interest rates. Yet, they hesitate to purchase and decide to look at more homes the following week!

However, something new is occurring, something not seen too much in recent years. Many of the recent homes previewed are under contract the following week, and many owners had multiple contract offers to choose from. In fact, some market areas are experiencing slight price increases.

Mortgage interest rates have dropped the past five weeks. It is quite common to find interest rate quotes for 30 year fixed mortgages at 4.6%, versus 5.25 % as recently as December, 2010. And 3.8% for 15 year fixed rate mortgages. Yes, it is not too difficult to believe that mortgage interest rates may be at the bottom! The information below, from very respectable sources, is something a home buyer may want to analyze.

The image below is obtained from The KCM Blog:
Four major institutions project rates: The National Association of Realtors (NAR), Fannie Mae, Freddie Mac and PMI. Here is what each is seeing in the next year.

Projected Mortgage Interest Rates_5.2011Yes, the above interest rates are projected, but let’s look at the mortgage payment ramifications as mortgage interest rates increase.
4.6%                 30 Year Loan             5.75%
                              $250,000
$1,281.61                                             $1,458.93

If  purchase prices do not change in the next 12 months and the mortgage amount remains the same, an increase in mortgage rates to 5.75% would cost a home buyer approximately $177 a month more, $2.124 for one year and $21,240 over a 10 year period of ownership.

What if real estate market values have not hit bottom, drop an additional 3% and the mortgage interest rate increases during the next year? These are the new calculations when reducing the mortgage amount by $7,500, or 3%.
4.6%                 30 Year Loan             5.75%
                              $242,500
$1,243.16                                             $1,415.16
If per chance  mortgage rates did not increase, there would be a monthly savings of approximately $38. If mortgage rates did increase to 5.75% and the purchase price did drop by 3%, the mortgage payment would still be approximately $134 more than it is today.

In fact, if there is a change in mortgage interest rates to 5.75% and a buyer postponed their home buying decision, there would have to be a drop in market values of approximately $23,000 in order to have a mortgage payment comparable to what it is today.

Home buyers should pay attention to how much real estate values have dropped in the past 6 years. Home buyers should pay attention to what real estate values are right now, and not ponder whether they will drop further, or try to time the market to when they may hit bottom!

A home buyer will not know when real estate values have hit bottom. The bottom is only known when real estate values and sale prices increase!

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Mortgage Interest Rates: First Quarter 2011

April 2, 2011 by Leave a Comment

After increasing to over 5% in late December of 2010, ranged from 4.75% and slightly above 5% throughout the first quarter of 2011.

Image courtesy of BankRate.com.

Whether buying or selling a home in , New Jersey or  or , in Middlesex County or in  any other State, the movement of mortgage interest rates should be of interest. A simple change from 5% to 5.25% in a mortgage rate for a 30 year loan for $200,000 is $30.77 per month in the monthly payment, and $46.15 for a $300,000 loan. View a mortgage calculator for the  calculations you would like to look at.

Is this move to over 5% a sign that rates are moving up? There will be lots of opinions on the near term future direction of mortgage interest rates. However, here are two simple facts. It is Spring now, and year after year, real estate home buying activity increases during the Spring. Second of all, home buying activity has increased! There is more buyer activity, there are more under contract transactions and there are  more multi offer situations on various various properties. Do you think these two factors can give you some insight?

Mortgage interest rates not only affect home buyers, they affect home sellers as well. If rates increase, a home buyer’s mortgage payment will increase. And since income and down payment generally remains the same, the amount to be mortgaged must also be lowered and naturally the the price range to purchase drops. A true domino affect!

There is only so long that mortgage interest rates can remain at or near historically low levels! What are your thoughts? I would like to know!

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More Mortgage Basics For Home Buyers

April 1, 2011 by 1 Comment

Know Your Limits

A home buyer needs to know their financial limits. A home buyer needs to know how much of a mortgage payment they can qualify for based on their income, but more importantly, they need to also know how much they are willing to pay per month in a mortgage payment. There is a big difference in these two statements!

Some buyers can afford a mortgage payment at the upper limits of standards and guidelines, while others are not and desire to keep the mortgage payment at a lower, more affordable level. Buyers have different life styles and personal expenses. Some have higher transportation costs to get to work, such as commuter costs. It is important that buyers know what they can afford to pay in a monthly mortgage payment in addition to their personal financial obligations.

As discussed in a previous post, More Basics for First Time Buyers, a buyer’s mortgage payment should not exceed 28% of their monthly gross income. However, to better understand mortgage payment affordability, a home buyer needs to have an understanding of one of the benefits of owning a home. And that is the benefit of income tax deductions on the mortgage interest and real estate taxes.

Sample Scenario: If the home being purchased involved a $200,000 mortgage at 5% interest, the principal and interest payment would be approximately $1,073 per month. For 12 months, the approximate amount of interest payments would total approximately $9,930 . Let’s say real estate taxes are $6,500 per year. In this example the total interest payments and real estate taxes for a full year would equal $16,430, and that total would be an income tax deduction on Federal and State Tax Returns.

For explanation purposes, let’s use a 20% IRS Tax Bracket. That would result in Income Tax savings of $3,286 for the year on Federal Income Taxes alone. It is highly recommended a Tax Professional is consulted for actual calculations. 

The Pre-Approval Process

A home buyer is told that they need to be pre-qualifed for a mortgage loan before they start looking for a home. Yes, that is highly recommended. Obtaining a mortgage is a thorough process and involves an analysis of income, employment history, assets, liabilities and credit. There are underwriting standards which must be met.

If the mortgage approval process is thorough, why shouldn’t the pre qualification process be thorough as well? All too often a buyer speaks with a mortgage lender, authorizes  a credit check, provides verbal information about income and then obtains a mortgage pre qualification letter. The pre qualification process should not be a verbal process.

Most buyers do not realize there is adifference in being pre qualified and pre approved.

The Mortgage Application Process

Buyers need to be aware of the mortgage application process. Obtaining mortgage approval can be an easy process or one that many buyers describe as, “a nightmare”.

The mortgage approval process is all about verifying income, verifying assets and verifying liabilities. A home buyer needs to be prepared to provide personal information!

First of all, bring your check book. A mortgage application fee is required with most all applications. The fee is for mortgage processing, the credit check and ordering the bank appraisal for the home being purchased.

It is recommended that home buyers have copies of two years of W2 forms(tax returns if self employed), year to date paystubs, bank saving statements and retirement saving statements. Likewise, copies of outstanding liabilites should also be available, such as student loans, car loans/leases, credit card balances and minimum payments, etc. A personal recommendation: keep copies for yourself. Application paperwork can get lost or misplaced during the mortgage application process, and keeping a copy can save time and aggravation if that occurs.

Many buyers get assistance from family in the purchase of a home. Sometimes it is given in advance and sometimes it is given during the mortgage application process. A gift letter may be required. More importantly, keep a copy of the check deposit for a paper trail. Many lenders will require explanations on any large bank deposits.

The credit check during the mortgage application process wil be more thorough than the credit check done during pre qualification. A buyer should not think they can hide things which exist in their credit history, such as credit card charge offs, late payments, disputes and the like. Items like these can affect the mortgage approval process. If situations like these do exist, discuss them with the mortgage representative in advance. 

It is now becoming common for some mortgage lenders to run another credit check prior to closing. A buyer should be cautious on credit card use during the application process, especially large purchases like a car and furniture for the home to be bought. Too much credit card use could have an affect on income qualifying.

Help yourself make a home purchase a pleasant experience! Don’t be afraid to ask questions!

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Mortgage Basics for First Time Home Buyers

March 13, 2011 by 1 Comment

Mortgage Basics for Home Buyers

Whether looking to buy a home in , New Jersey,  in , in , in Middlesex County or any other State, a home buyer needs to understand mortgage loans, , mortgage payment affordabilty and the mortgage application process. The reason for this is very basic: most all buyers need a mortgage loan to purchase and close on the home to be purchased!

Keeping the Explanation Very Simple!

There are three basic mortgage loans available to home buyers:
Conventional Mortgage: a mortgage loan not insured or guaranteed by any agency of the federal government
FHA Mortgage: a mortgage loan insured by the the Federal Housing Administration 
VA Mortgage: a mortgage loan guaranteed by the Veterans Administration

The type of mortgage(s) available to a buyer is primarily determined by the buyer’s financial circumstances, such as amount of down payment and income. In addition, there are different down payment requirements, different mortgage qualifying guidelines, different mortgage related fees and different credit report standards with each mortgage loan.

A VA Mortgage is available to Military Veteran home buyers and requires very little or no down payment, has more liberal mortgage qualifying income and credit standards and allows the buyer to finance their closing costs.  There is a VA Funding Fee, which is usually added to the mortgage. For first time users, no down payment requires a 2.15% fee, up to 10% down payment requires a 1.5% fee, and 10% or more requires a 1.25% fee.

An FHA Mortgage is available with a down payment of 3.5%. There is a Mortgage Insurance Premium(MIP), which includes an up front premium that is generally financed by the buyer and added to the mortgage and a monthly premiun which is added to the monthly mortgage payment. This mortgage insurance can be eliminated when the loan to value ratio reaches 78%.

Conventional Mortgages generally require a down payment of 20%. There are conventional mortgages available with down payments of less than 20%,  but they are not as easily obtainable as they were 5 years ago. However, a conventional mortgage with less than 20% down requires Private Mortgage Insurance in the form of an upfront premium paid at closing or added to the mortgage and a monthly premium added to the monthly mortgage payment. With buyers having down payments between 10% and 20%, a conventional mortgage with PMI may be a possibilty depending on the mortgage lender. I am not aware of any lender offerring conventional mortgages with 5% down at the moment.

Mortgage Terms:
Fixed Rate Mortgage: a mortgage loan where the interest rate remains the same for the entire term of the loan. The most common and preferred is a 30 year loan for . While other terms are available, the 15 year mortgage loan generally provides a slightly lower interest rate than a 30 year mortgage.
Adjustable Rate Mortgage: a mortgage loan where the interest rate adjusts at given intervals, generally one, three or five years. The initial interest rate will be lower than the a 30 year fixed rate mortgage loan, and provides the ability for a buyer to obtain a larger mortgage without increasing the initial mortgage payment. Important considerations are the interest rate adjustment caps at each interval period and for the lifetime of the loan. Home buyers need to analyze the benefits and risks involved with adjustable rate mortgage loans.

Mortgage Payment:
A mortgage payment consists of principal and interest, monthly real estate taxes, monthly homeowners insurance and monthly mortgage insurance premium, if applicable, and is commonly referred to as PITI.
For mortgage qualifying puposes, if there are homeowner association monthly fees, they are also considered.

Mortgage Qualifying:
Important criteria in the mortgage approval process is the analysis of a home buyer’s income, employment history, credit score and monthly debt. Of importance, income is income only if it is reported to the IRS and can be verified.
There are various lenders who provide mortgage loans to buyers who do not meet general mortgage qualifying standards and guidelines.

There are Mortgage Income Qualifying Guidelines lenders follow in the mortgage approval process, commonly referred to Mortgage Qualifying Ratios. While these guidelines vary from one mortgage type to another and sometimes from one lender to another,  there is an acceptable standard a home buyer can rely on in calculating an affordable mortgage payment.
28%/36%: a monthly mortgage payment(PITI) should not exceed 28% of the the home buyers monthly gross income, commonly referred to as the front ratio;  a monthly mortgage payment(PITI) plus monthly recurring debts should not exceed 36% of monthly gross income, commonly referred to as the back ratio.

There is so much more to the mortgage application and mortgage qualifying process than the basics discussed here. Mortgage standards and qualifying guidelines are always changing.  Look for more information to be posted regarding the information needed for a mortgage application, the mortgage application process, closing cost charges and more. Have a question, do not be afraid to ask.  

Upon making the decision to look for a home, it is extremely important for a home buyer to contact and meet with a Mortgage Representative from a bank or a mortgage company for the purpose of obtaining  mortgage pre approval and getting a thorough understanding of the mortgage qualifyng process. Not sure who to call? Recommendations from friends or family who recently purchased is one option, where you bank is another and the REALTOR you are planning to look at homes with is another. Need recommendations?

The mortgage application and mortgage approval process is important in a real estate purchase. It will be much more beneficial if this meeting is in person, and not simply done on the phone!

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Changes in FHA Mortgage Loans Coming April 18, 2011

February 16, 2011 by 1 Comment

FHA Loans Will Cost More After April 18, 2011
The FHA Mortgage Insurance Premium (MIP) will increase 25 Basis Points

Just the other day, FHA Commissioner David H Stevens announced changes for . These changes are for any FHA loans that are assigned case numbers on or after April 18, 2011.

Instead of paying the current rate of .9 % of the loan amount, and then dividing that by 12 to reach the amount of MIP paid monthly, the new calculation will be 1.15 % of the loan amount divided by 12 to equal the monthly payment.

Example: $250,000 Mortgage Loan
.9 % Calculation: $250,000 X .009 = $2,250 /12 = $187.50 per month
1.15% Calculation: $250,000 X .0115 = $2,875/12 = $239.6 per month
This is an increase of $52.00 per month!

The upfront mortgage insurance premium (UFMIP) amount will remain unchanged at this point and remain at the current rate of 1.0% of the loan amount.

These changes will affect monthly and !

If you have been prequalified to purchase a home and have not yet found the right one, take a more serious approach to looking now and purchasing one before April 18th! After April 18th, the mortgage payment will be more and you will need to update your mortgage pre approval to reflect these new MIP monthly premiums.

Contact your REALTOR for more information! Contact your Mortgage Representative for more information! are still near historic low levels! Home prices have become more affordable!

Don’t Just Sit on the Fence and Watch!

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Filed Under: Home Buying, Mortgage Pre Approval, Mortgage Pre Qualification, Mortgages, Real Estate News Tagged With: ,

Mortgage Rate Update

February 11, 2011 by Leave a Comment

Let’s Talk About Again!

Mortgage Interest Rates

Well, interest rates increased to over 5% in December, 2010. Then they retreated to a little under 5% in January, 2011. Now, they are moving back up above 5% again. Refresh your memory with a review from my January 10th post.

First of all, mortgage rates at 5% are near historic lows. And yes, they may retreat again to under 5 % again. BUT……

What if they don’t? What if they rise further? As the interest rate increases, so does a home buyer’s mortgage payment. A small mortgage rate  increase of .25% increases a mortgage payment approximately $32.00 per month on a $200,000 mortgage loan. The options are either paying $32.00 more per month, borrowing approximately $6,000 less in a mortgage loan or paying $6,000 less in the price for a home just because of an rate increase of .25% relative to a $200,000 mortgage loan. Not too pleasant in thinking about if you are currently looking to purchase or are planning to look for a home shortly, is it?

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Mortgage Interest Rate Surprise?

January 10, 2011 by 1 Comment

Interest rates have been surprisingly low for such a long time, no one really thought they would go up. Well, they did, and everyone was caught off guard.

In fact, at the end of December,  increased to 5%. and slighly higher. A surprise to most people involved with real estate!

The Good News is that they have dropped back down to 4.75% in the past week. However, prior to the increase they were in the 4.25% range. That is still a half percent difference. That difference in a .5% change in an interest rate would be approximately $41.00 per month for a mortgage in the amount of $275,000. In other words, the rate increase of .5%, increased a monthly mortgage payment by approx $41.00 per month this past month for buyers searching for a home.

That $41.00 per month change equates into an appox $7,000 change in mortgage borrowing ability. In other words, in order to keep the mortgage payment equal to what is was at 4.25%, a buyer would have to reduce the amount borrowed by $7,000 and reduce their price range by $7,000.

Yes, mortgage interest rates do have a tremendous affect in home affordability, whether you are looking to purchase a home in , New Jersey, , , in Middlesex County or any other State. With mortgage rates still at historically low levels, the important question is when will they increase and by how much!

Planning on buying a home in 2011? Take advantage of mortgage rates now before you start finding that they are in the 5% plus range! Why risk higher or lowering your price range due to increased mortgage interest rates?

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