Friday, August 22, 2014
By John VoketSummertime is the perfect time to enjoy a trip to the amusement park. But it's a bad time for the rollercoaster ride consumers may be subject to as they close in on their new home purchase.
According to a recent notice from realestateeconomywatch.com, downpayments, for example, are creeping up.
From April through June 2014, about 67 percent of first-time buyers made a downpayment of 6 percent or less, down from 74 percent in 2009, according to the latest Realtor Confidence Index report from the National Association of REALTORS.
One reason the average down payment is growing may be that more and more first-timers are choosing conventional over FHA financing, which requires only 3.5 percent down. Since conventional loan underwriting standards have been getting tighter and borrowers’ costs are going up.
Tight underwriting standards are especially challenging for first-time buyers, who generally need a mortgage with low down payment terms.
Cumulative increases in FHA insurance premiums translate to about $100 a month in additional out-of-pocket costs for borrowers - also discouraging buyers from using FHA financing, according to Realtors participating in the survey.
On the flip side, homeowners who do opt for FHA financing could save more on their new home purchase by qualifying for the new federal HAWK program. HAWK stands for Homeowners Armed With Knowledge, and links HUD’s Housing Counseling program with FHA-insured mortgage origination and servicing.
The HAWK for New Homebuyers pilot provides FHA insurance pricing incentives to first-time homebuyers who participate in housing counseling and education that covers how to evaluate housing affordability and mortgage alternatives, to better manage their finances, and to understand the rights and responsibilities of homeownership.
Learn more at hud.gov or e-mail specific program questions to housing.counseling@hud.gov and include “HAWK Notice Question” in the subject line.
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