Loan limits for mortgage loans backed by Fannie Mae and Freddie Mac will increase next year for the first time in ten years. In recognition of rising home prices nationwide, the loan limit for a conforming loan (not a jumbo loan) will increase from $417,000 to $424,100. For areas like the Seattle/Bellevue metropolitan area, which have a more expensive housing market, loan limits are much higher. In King, Pierce and Snohomish counties conforming loan limits will increase from $540,500 to $592,250 next year.
What does this mean if you’re planning to purchase a home in 2017? Jumbo mortgage loans (over the new limit of $592,250) generally have higher interest rates, require higher credit scores and larger down payments of 15-20%. These steep requirements can keep many highly qualified home buyers out of the market – buyers who have the income and employment history to qualify for a loan but don’t have a 20% down payment. When the conforming loan limit is raised, it opens the door giving qualified buyers with 3%, 5% or 10% down an opportunity to get in the game.
If you haven’t talked with a lender or Realtor® lately, now would be the time to start that conversation to see how the increase in loan limits could benefit you.
The Federal Reserve raised interest rates by 0.25 percent this week, causing concern that increasing mortgage interest rates will follow, which could have a negative impact on the housing market. Its unlikely we’ll see any significant increase in mortgage interest rates in the immediate future. Could they rise next year, possibly, but not enough to cause concern. The latest increase in interest rates will likely be felt first for revolving credit (credit cards and home equity loans). For non-revolving loans, like mortgages, there should be little, if any, immediate impact. Any increase in mortgage rates does make buying a home more expensive, but its the credit card debt, which may become more expensive, that could be of concern for buyers who want to purchase a home next year.
Here’s a little perspective . . . many years ago I worked in the mortgage banking industry in Washington, DC. Mortgage interest rates were in the low teens and people still bought and sold homes. After that experience, any interest rate under 10% looks great to me! With current interest rates still so favorable, any slight increase isn’t likely to have a negative impact on area home values.
Condominiums offer a great opportunity for first time buyers to enter homeownership and begin to build wealth, equity and credit. FHA (Federal Housing Administration) loans were a popular option for financing as they often offered favorable interest rates and lower down payment options than conventional loans.
In recent years FHA has placed significant restrictions on the purchase and sale of condominiums, preventing some buyers from purchasing condos, harming homeowners who want to sell and limiting the ability of condominium communities to attract buyers. In order to obtain FHA financing on a condominium, the community must meet a strict list of requirements and obtain FHA certification (a labor intensive process and expensive for the HOA) and re-certification is required every several years. As a result, many communities have allowed their FHA certification to lapse and FHA insured condo mortgages have plummeted in recent years.
Lawmakers are urging FHA to review their guidelines and ease restrictions on condominium community certification requirements in an effort to make FHA financing an easier process and promote affordable homeownership opportunities. The National Association of Realtors (NAR) has been pushing FHA on many of these proposed changes for over three years.
Condos are a critical part of the natural progression of homeownership. Reducing the current restrictions impacting FHA condo financing will go a long way in assisting first time buyers who are entering the market, current condo owners who are ready to sell and move up to a larger home and seasoned homeowners who are ready to downsize to a lower maintenance lifestyle.
There are currently 95 condominiums for sale in the downtown Bellevue marketplace (zip code 98004).
- 43 new construction units at Washington Square (prices start at $590,000)
- 52 resale units (prices start at $249,950)
- Of those 52 available resale condos, just over 40% of those are priced under $500,000.
In the last 30 days 33 condos in downtown Bellevue sold and another 23 have sales pending. If you’re in the market for a condo downtown, or anywhere on the Eastside, selection is slim and it doesn’t appear that trend will improve in the coming months.
If you’re a seller, now is certainly a great time to sell. While this condo bull market doesn’t mean you don’t need to prepare your home for sale, o thatr you can price it inappropriately for the market (it will still need to appraise), it does mean it will likely sell quickly.
If you’re still on the fence about buying, with mortgage interest rates on the rise, now is the time to climb off that fence. Freddie Mac reported last week that 30 year fixed rate mortgages set a new high for 2015 averaging above 4% for the first time this year. Rising rates reduce affordability. Don’t get too comfortable sitting on that fence or the market could pass you by.
Historically low interest rates have been with us for the past several years but may soon be coming to an end. Mortgage rates are up for the third straight week. According to Freddie Mac the average rate on a 30 year fixed mortgage rose to 3.85% this week, up from 3.80% just a week earlier. This is the highest mortgage interest rates have been since last March.
Lenders have been warning of rising interest rates since last year but economic conditions have kept rates in the low to mid 3% range for longer than anticipated. As the economy and employment numbers improve, interest rates will begin to tick upward. If you’ve been thinking about refinancing your current mortgage or you’re still on the fence about buying a home, time may not be on your side. While there shouldn’t be concern about a 4% or 5% mortgage interest rate (I remember the days when interest rates were in the teens – yikes!) but every time interest rates increase affordability declines. If you’re in the market to buy a home in the next 2-3 months, talk with your lender about locking your rate. If you’re thinking about refinancing your home don’t put it off any longer. Get your paperwork together and submit it to your lender. Procrastinating could cost you money.