FHA Loan Rates After the Stimulus BIll is Signed

[houstonshark]

Does anyone anticipate FHA rates to drop after the stimulus bill is signed or in the near future?  I am building a house and would like to lock the rate soon but the current rate is 5.5% with 3.5% down and no points and I keep hearing that the rates are going to drop again.

Thanks 

[Anonymous]

Who knows.  Most of the rates that have been below 5.5 have come with points that I have seen, but I have not been watching the rates as much since I bought.  Personally, if I had a 30 year fixed loan at 5.5% with 0 points and low down I would probably just lock it and be done with it.  The couple dollars you save are not worth the constant back and forth, checking rates, and the risk of rates going up.  With FHA, if rates do stay down, you can alwasy do a streamline refi in a 6 months or so after you move in if rates really do drop into the low 4's.  To each their own though, I personally just hated the guessing game on interest rates and historically 5.5% fixed with zero points is a great loan.

[Anonymous]

I would advise you to talk to as many lenders as possible.  Get some referrals from your realtor, family, and friends who have purchased anytime recently.  I had quotes that were as far apart as 0.5% in interest rates.  And many LOs will quote you a certain rate w/ points, and they have at their discretion the ability to knock off 0.5 to 0.75 pointst.  I locked in my rate last week, and it was 4-7/8 w/ 1 point, the LO knocked off 3/4 of a point and I ended up with 4-7/8 w/ 0.25 points.  Develop some relationships now and get some prelim GFEs, its amazing how much they differ.

[houstonshark]

I am still going to check with a couple lenders but I plan on using my builder, Ryland since they are offering about $8k off if I use their financing.  I don't plan on staying in this house for longer than 5 years so the $8k off is prob a better deal.

[Anonymous]

Not to question your plans, but if you are not planning on staying for more than 5 years, buying a new homw build is very risky.  New homes are more expensive in general than existing ones.  The chance is (unless you are putting alot of money down) you will be underwater or break even in 5 years with this economy and housing market.  While not as much as a car does, a brand new home will amost immediately depreciate unless you are in a hot real estate market (which are pretty much non-existent right now).  Predictions are another 10-15% drop in most areas before recovery.  Even if you put alot down so you sould not be underwater, it would still be money lost.

hopefully I didn;t offend you, but it is a serious question.  Everyone is saying it is a good time to buy LONG TERM, but a very risky time to buy short term.

[Anonymous]

5.5% is pretty good -- less than my parents paid over 50 years ago! Waiting for the bottom of a market is a good way to miss it.

[Anonymous]

I agree that waiting too long may be dangerous.  I think there is a good chance that once the markets recover a bit, rates are going to go up quite a bit (not tommorrow by any means though).  My main concern would be in looking at any home (and in particular a new build) in any short term manner.  It is a huge gamble.

[houstonshark]

Thank you all for your input.  I went ahead and locked it at 5.5%.  I was really hoping for a better rate.  I was quoted 5% back in December but the loan officer kept dropping the ball and did not lock it for me (she is now jobless).  They are giving me a 90 day free float down of the rate so if it drops in the next 90 days I can take the lower rate for free.

I would agree that homes are not a good investment and a new home is generally not a very good short term investment.  One thing to understand though is that the Houston area where I live has not been hit nearly as bad with the current housing crisis or even the economic crisis that the rest of the country has been suffering.  Houston's economy still somewhat revolves around oil and even though the cost per barrel is very low, the local economy is still doing well.

We sold our house back in November in a week for about $8K over the area comps.  The buyer even bought another $6K in electronics that were in the house.  We had lived there for 4 years.

The new home we are building is in a neighborhood that is a few houses away from being completely built out.  We decided to sell our house and build a new one because we needed an extra bedroom for a new baby.  Our old house had also appreciated by about 25% so we used that equity to pay off all our debt.  I only expect to stay in this home for about 5 years but obviously if we are upside down or cannot sell it we will have to stay.  Realistically, we could stay in this home for 20 years if we had to.  We love the neighborhood, the area and the school district but the plan is to sell in 5 years or so and move into a nicer home.

[Anonymous]

That makes more sense as long as you realize it may not go up.  I was saying the same thing about the economy here in my area of So Cal (it hadn't really dropped any and people were still spedning money) and in the last few months it has totally flipped.  I would be leary if it was a situation that I knew I was going to have to move in a few years but if it was a matter of wanting to move/upgrade in a few years but being realistic about it that is another story.

[houstonshark]

The house we are building is nothing crazy at all (about $190K) but is something we could be happy with for a long time.  We decided to build simply because we did not like ANY of the homes in our price range.  We would have to come out of pocket a lot in order to upgrade most of the homes we saw to our liking.  With this home we got pretty much every option we thought we would want (and the builder kicked in almost $30K towards upgrades!) so that if we had to stay there for a long time we could still be happy.