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FHA Loan fee increases to help the market?

by | Mar 5, 2012 | How to Guides, Market Reports, Media Center

Here is the Q+A from my interview this morning on News Radio 101.1 FM – KXL.

With inventory at new lows and bidding wars becoming commonplace again we look at new changes to FHA financing which might turn the heat up even higher! Here to discuss these changes and their impact is real estate expert Nick Krautter from Keller Williams Real Estate and

Q. What are the new changes to FHA financing and when do they start?

A. The upfront premium is going from 1% to 1.75% of the loan amount which means closing costs will rise by almost 1% which is huge when you know that total closing costs are typically around 3% of the sales price. The annual premium is also going up by 0.1%.

Q. What effect do you see this having on the market?

A. This will continue to push prices up in the market as most first time buyers need closing cost credits from sellers and when there are competitive bids for homes that credit is put on top of the price so the net offer is still competitve. This will add to the already red hot first time buyer market which is averaging over asking and push prices even higher.

Q. Do you think this will scare away first time buyers?

A. There is already a lot of confusion since the change in the market is happening so quickly. Buyers can wait until there is more inventory but they risk being on behind the market if the trend holds and prices continue to rise throughout the year.


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