3 BIG Reasons To Buy A Home Now That Every Home Buyer Needs to Know!

For those in the market to buy a home in the next 6 months you better act fast because its about to get more expensive. Already mortgage lenders have cut back dramatically and totally removed loan programs off the market and now Freddie Mac and Fannie Mae are starting to increase fees on loans making buying a home more expensive and maybe even pricing out some home buyers altogether.

Freddie Mac states “In response to continuing volatility and turmoil in the mortgage market, including the deteriorating performance of higher-risk mortgage products, we are expanding our use of risk-based pricing by adding fees based on Indicator Score and loan-to-value ratio. We are also increasing our delivery fees for certain Mortgages with increased risks.”

Reason 1: Starting in March 2008 there is going to be a .25% delivery fee called a Market Condition Delivery Fee. So for a $200,000 purchase price this would equate to a charge of $500. The Market Condition Delivery Fee is in addition to the announced Indicator Score/Loan-to-Value delivery fee.

Reason 2: The Indicator Score/Loan-to-Value Delivery Fee is the most significant. You will see by the chart below that depending on your credit score this fee can range from a fee of $1,000 to $4,000 based on a hypothetical $200,000 purchase price, this is IN ADDITION to normal closing costs.

So if closing costs and escrow are $5,000 on a $200,000 loan amount, you then add these new fees depending on your credit score. So a worst case 620 credit score would have to pay $9, 500 on a $200,000 purchase price. Fannie Mae and Freddie Mac have already reduced the amount the seller can pay from 6% to 3% on their First Time Home Buyer Programs or any loan over 90% loan to value. So using this same example the buyer would have to come out of pocket with $3,500.

I do not work with a tremendous amount of First Time Home Buyers, its just not my main market, but the ones I have worked with, I can not remember one this year that would have had $3,500 to spare definitely none had $9,500. I hate opinions because they are not based on any facts, but I think that this is the initial step towards 100% programs going away temporarily until the mortgage market corrects itself.

Reason 3: Maximum Financing in Declining Markets. Fannie states in a press release dated 12/05/2007 that in declining markets they are reinstating their maximum loan to value to 5% less than the maximum allowed for the selected mortgage product. Areas in Northern Virginia such as Arlington, Fairfax and Alexandria being the ones that affect my homeowners or buyers the most. What this means is if you live or want to buy in a declining market and you qualify for 100% financing, mortgage lenders are only going to offer 95%. Appraisers have to state, among a laundry list of other requirements, in the appraisal whether the home is in a increasing, stable or declining market. If you think you may be in a declining market you can know for sure here.

Seems that every step taken to help troubled home owners, the mortgage lenders and GSE’s (Government Sponsored Entities) are taking it 2 steps back. So the bottom line is if your in the market to buy a home, now is the time. Do not listen to the media and all the doom and gloom of property values declining. Every market is different and not all markets are declining. Not doing this may very well put you out of the home buying market altogether.

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