Due to the difficult condo market, FHA (Federal Housing Administration) has changed their policy guidelines to be more lenient for financing effective December 7, 2009. Under the new modifications, FHA has now lowered the 51% owner occupancy requirement to 50%. The government has also reduced the pre-sale requirement from 50% to 30% of the total units. Lastly, the concentration limit has been increased from 30% to 50%, and may even be increased to 100% in established projects.
They’re not at record lows like they were last month, but they are still insanely low given how high they were last year at this time.
Combine low mortgage rates with home affordability being slightly lower than the record set last quarter, and you’ll be surprised with some of the numbers you can find.
I sort of feel like a chef right now just throwing some ingredients into a pot and seeing what comes out of it.
I was thinking about something similar yesterday at dinner with my family – who came up with the idea for minestrone soup?
Imagine some dude just sitting around and out of nowhere saying, “Hey, let’s throw some celery, some beans, some tomatoes, a little bit of pasta in some broth and see what happens.” Boom. You now have arguably the greatest soup ever.
A little tangent? Yeah. Want to make a big deal out of it? Didn’t think so.
Here’s the deal – homebuyers are actually in a position that is unprecedented as a result of low mortgage ratess and high home affordability. The lower rates drop, the more home potential homebuyers can afford.
Plus, homebuyers can snag a large home for a low price and make out like bandits on their investment in the future if the market improves.
Take a look at the chart below. A homeowner paying $2,000 a month on a $325,000 home loan with a 6.0% interest rate can now afford a home valued at $425,000 because of how low rates are.
How about this food for thought – with 10% down and the same $2,000 monthly payment, the borrower today could buy a home worth $470,000 as opposed to a $360,000 home three years ago. Factor in the notion that the $470,000 house was worth $670,000 before the crisis, a borrower can afford almost DOUBLE the home they could in 2009.
That’s crazy talk right there.
Not only can clients afford more home than they could in past years, but some can finally reach their goal of homeownership.
Pretty much, there really isn’t a better time to buy a home than now. Renting is more expensive than buying, mortgage rates have inched upward but are still crazy low, and home affordability is in a position to be beneficial for buyers.
Why wait? Go out and purchase that home of your dreams today!