Financing Your Phoenix Real Estate Purchase? Possibly Expensive Changes are Coming

We’ve talked about this a little bit before as 2009 came to an end, but all signs are pointing to increasing interest rates as 2010 continues.

Government participation in purchasing loans is expecting to wane and as that happens rates are expected to climb – we’re not going to see the beautiful 18’s of the late 70s and probably not even the 8’s of the late ’90s, but the days of the 4’s and very low 5’s are likely going to fade into the rear view mirror.

Which means those buyers still sitting on the fence are faced with another reason to make a decision this spring – jump and purchase or slip off the backside and keep on renting. (Reason number one remains the $8,000 or $6,500 homebuyer tax credit due to expire – hopefully once and for all – April 30.)

Speaking of fun with real estate lending, FHA is tightening its own rules and regs as the entity’s capital ratios continue to head the wrong direction due to the high popularity of its low 3.5 percent down payment.

Once upon a time, FHA wasn’t credit score dependent. Those salad days are long past; if you have a credit score under 580, you’re going to need 10 percent down instead of the much gentler 3.5 percent.

Seller contributions are being capped at 3 percent versus the old 6 percent, which would be remarkable if it had been possible to get more than 3 percent toward closing costs in a market environment where appraisals come in at the number and not a dollar higher (and once in a while lower, though I haven’t seen this as much as other agents.)

Upfront mortgage insurance on FHA loans also is going to rise from 1.75 percent to 2.25 percent, assuming FHA gets approval from the government on the change.

Lastly, just in case one of my Canadian readers made it this far, the loony has run away from par again … I may be in the minority but I’m not seeing par happening any time soon as there are more reasons for it not to happen than reasons for it to occur.

All in all, some potential gloomy news on a dark and damp Thursday morning …

[tags]Phoenix real estate[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at