Effective October 1st, you can no longer have the seller pay your down payment on your Palm Harbor real estate investment, or even a hut in Timbuktu.  Unless you’re a veteran of the armed forces, you will need at least 3% of your own or gifted money to purchase a home anywhere in the US – with no exceptions.  The reason?  The recent approval of HR 3221 and all that it entails. 

The passage of this bill eliminates ALL seller-funded down payment assistance with FHA-guaranteed loans. In addition, if you were thinking of buying a new home, home buyers will no longer be able to rely on nonprofits that funnel money from home-builders into seller-funded down payment assistance programs.

HR 3221 therefore finalizes HUD’s long quest to end that practice as well. The US Department of Housing and Urban Development (HUD) claims that the provision of monies from the seller causes an artificial inflation in the housing market statistics. This is because the record of the transaction at closing, (known also as the HUD), reflects the price of the home to be higher to compensate for the closing costs paid by the seller (a fair argument).  

The belief is also that the odds of the homebuyer defaulting on the loan triples as they are basically buying the home with no money out of their pocket but with money provided by another party.  Seller-funded down-payment assistance has become extremely popular as it was used on more than 35 percent of all home purchase loans insured by FHA in fiscal year 2007. This is a dramatic increase compared to less than 2 percent seven years ago. We want you to be aware of how the changes can affect you and your home purchase plans.  Feel free to contact us regarding this pending change. 

A recent survey and a rate increase could mean more competion for Pinellas homes.

Recent indication is that first time home buyers are getting tired of sitting on the sidelines. According to a recent online poll taken by the National Apartment Association, 17 percent of renters plan to make the jump to home ownership in the next year; 41 percent of the 2,041 respondents planned to be home owners within two years. Only 31 percent planned to still be paying rent five years from now.

Another factor that could very soon contribute to an increase in Pinellas home buying could be rising mortgage costs. Fixed-rate mortgage rates rose to 6.32 percent, the highest it has been since October. After months of aggressively dropping interest rates, many lenders are worried that the Fed will be forced to raise rates back up. As interest rates rise, so do mortgage rates. According to a press release on freddiemac.com, Frank Nothaft, Freddie Mac vice president and chief economist said that, “Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman [Ben] Bernanke and Vice Chair [Donald] Kohn, expressed concern over a threat of inflation.” We may very well be seeing the beginning of the end of the super-low mortgage and potential buyers may realize that with rising rates, now may be the time to jump in. Nothaft added, “Moreover, pending home sales for April unexpectedly rose by 6.3% and mortgage applications for home purchases … were also up last week.”