Higher Loan Limits and Lower MI Make 2017 a Great Year to Buy Despite Rising Rates

The rates are rising…The rates are rising.   Like Paul Revere riding through Boston we are hearing alarms from a lot of the industry.  To read the headlines, we would think that the sky really is falling in and about to crush us.

Truth be told, we have a lot to look forward to in 2017 including a potential relaxation of over regulation and the opportunity to possibly see Dodd Frank rewritten (I hate to say this but I honestly think repeal is too much to hope for).  But assuming that nothing earthshaking happens with regulations, here are three reasons this is still a great year to buy in spite of rising rates.

1.       Rates are still very low.  Even with all the talk of rising rates, we are still well under 5%.  When I started in this industry in 1998, Bill Clinton was president and mortgage rates sat between 8.25% and 8.5%.  Alan Greenspan was chairing the Federal Reserve and most Americans were pretty happy with the economy.  When rates dropped to 7.125% in the first part of 2000 there was a refinance boom as people rushed to save 1.5% on their mortgages. Today even in the increasing rate market, a thirty-year fixed mortgage rate is sitting about 4% lower than the thirty year fixed rate was then.  I have spent this entire week in industry meetings, and most experts seem to believe that although the Fed is is scheduled for three interest hikes this year, mortgage rates may not exceed 5% by the end of the year.  But let’s say that they go up to 5.875%.  In 2005 5.875% was a good rate.  The housing market was booming.  As the economy improves and millennials are able to find higher wage jobs, they may want to start leaving those apartments and getting into homes.  And while a 6% rate won’t be as low as the one their parents have, it will be substantially lower than most of the rates their grandparents paid.  Perspective is important here.

2.       Fannie, Freddie and FHA have all raised their loan limits for 2016.  Fannie and Freddie’s increase, though relatively small, is the first increase in 10 years.  The new conforming loan limit for 2017 is $424,100.00.  That number makes it possible for a person purchasing a $530,000 home to put 20% down and get a conforming loan.  With a second lien, homebuyers can go even higher on a purchase price without tapping into jumbo rates and jumbo restrictions governing credit, assets and debt to income rations.  The FHA increase is even more significant.  The new FHA loan limits for DFW—which includes Dallas, Collin, Denton and Tarrant is $362,250—a pretty significant jump from the previous $335,000.00.  FHA loan limit increases mean that more borrowers can qualify with higher debt to income ratios of 55% allowed by FHA.  Since FHA loan limits vary by county, you need to know the specific limits in your area before you start to shop.  You can check these here on the HUD website at https://entp.hud.gov/idapp/html/hicostlook.cfm.

3.       MI rates are going down as interest rates are going up.  Last year we saw mortgage insurance companies significantly reduce premiums on mortgage insurance (which insures the loan to the lender for borrowers making less than a 20% down payment.  The biggest reductions are for those borrowers with higher credit scores, and the reductions were high enough that it made sense to refinance borrowers out of second liens and into one loan with MI.  This year FHA is reducing its annual MI premiums by .25%.  Outgoing HUD Secretary Julian Castro says that this action is directly tied to the rise in interest rates, but it really is significant.  The former MI premium of .85% on the 30- year fixed 96.5% LTV is now just .60%.  This is a big enough savings to offset much more than a .25% increase to rates.  And with rents rising, an affordable monthly payment on a home is going to make a lot more sense.

If you are thinking of buying a home, don’t let the negative media discourage you.  Home ownership is still affordable and a home purchase is still one of the best long-term investments you can make.

Alexandra Swann has a master's degree in history with emphasis on the French Revolution. Her novel, The Planner about an out of control, environmentally-driven federal government, is available on Kindle and in paperback. For more information, visit her website at http://www.frontier2000.net.

 

 

Search and Rescue

“For the Son of Man has come to seek and save that which was lost”  Luke 19:10 KJV  

The end of every year is a fitting time to take stock of our lives.  We count our failures and successes, our blessings and our losses, and we look at where we have been and where we are going.

Many of us will make resolutions to change some aspect of our behavior in 2017.  We may want to lose weight, or get in better physical condition or to get promoted at work or develop better personal relationships, but for most of us when night falls on 2017, most of those resolutions will still be unfulfilled, shuffled forward to another year as we continue in a never-ending desire to become a better us.

Our newest release is The Invitation, the story of a man trapped in a miserable existence who unexpectedly one night receives an engraved invitation to begin a new life.  Kevin treats the invitation as a joke and does not respond, but the next morning when he awakens, his circumstances have profoundly changed. As the story progresses, though, Kevin learns that it is not enough to simply enjoy his new surroundings.  He must find a way to accept the invitation for himself and fully embrace the new life that it offers.

We just finished celebrating Christmas, and we looked at nativities and sang songs of the child in the manger, but Christmas is so much more than a sweet story about a little baby who was born in a stable.  The cave in which Jesus was born is symbolic of the tomb where He was laid after his crucifixion, and the swaddling clothes in which his parents wrapped him represent the grave cloths.  He did not come to earth to be a good man or a good teacher—He was born to die for us in the greatest search and rescue operation of all time.  The God of the universe looked down and saw our lonely, lost, dysfunctional world—a world which we were powerless to change—and loved us so much that He sent His only Son to save us. Jesus is our Kinsman Redeemer who came to release our debt, and He extends to each of us the greatest invitation we will ever be offered. But for His invitation to impact us, we must recognize the immense opportunity which we have been offered; then we must be willing to accept it for ourselves and fully embrace our new life.

As we start the New Year, I invite each of you to see 2017 as more than an opportunity for a new resolution.  2017 can be a year for a rescue—a year for salvation and a new life.  Accept God’s invitation to you in 2017. “For the Son of Man has come to seek and to save that which was lost.”

Alexandra and Joyce Swann's newest novel, The Invitation, was released Christmas of 2016.  For more information, visit their website at http://www.frontier2000.net.