Feds insuring bigger home loans for buyersJan 10th, 2017 | By Copydesk | Category: Featured
By Sarah Glenn
POCATELLO — As housing prices go up in Idaho, so do the amounts available on federally insured loans that help people buy homes.
Someone seeking a single family home, who doesn’t mind paying monthly mortgage insurance, and who wants a lower interest rate, can now borrow up to $275,665 backed by the federal government. That’s an increase of about $4,000.
This is the first time since January 2009 that the limits have increased — a sign that the housing market is heating up.
“That date shouldn’t be too surprising since because of the Great Recession, home sales prices either stayed flat or dropped precipitously in the vast majority of markets,” said Leeland Jones, a regional spokesman for the Department of Housing and Urban Development, or HUD.
And with economic recovery comes real estate recovery. The Federal Housing Administration increased the limits in 2,948 counties on Jan. 1, including those around Idaho. Lending levels remained the same in 286 counties, but nowhere did they decrease.
Despite the added mortgage insurance that comes with them, FHA loans are popular among first-time homebuyers for their low interest rates and less stringent qualification requirements.
In fact, 51,505 people across Idaho had federally-backed loans, as of Dec. 1, 2016. Last year, there was a record of more than 8,000 homes purchased in the Gem State through the FHA program. The number of homes this year is on track to match — if not exceed — the 2015 record.
“Traditionally, FHA has been seen as very attractive to first-time homebuyers because of the low down payment requirement (currently 3.5 percent),” Jones said.
While first-timers are the main group that might benefit from the increase, FHA loans are also attractive to families who need to refinance out of riskier mortgages.
“It is worth noting that during the Great Recession a very considerable proportion of FHA mortgage endorsements (about 40 percent) were for homeowners who were refinancing out of riskier mortgages they held (often Adjustable Rate Mortgages scheduled to explode) and who sought refuge in FHA’s fixed 30-year term,” Jones said. “That said, we do cover a pretty broad chunk of the home buying marketplace.”
In Idaho, the total dollar value of all those FHA loans was about $7.1 billion according to an Idaho HUD press release.
“If you divide the dollar value by 51,505, you get an average FHA mortgage value of $138,638 for these mortgages,” Jones said.
The program is meant to be a revolving door. Once homeowners achieve 20 percent equity in their home, they can refinance out of the FHA loan and drop their monthly mortgage insurance payment.
“What’s probably going to happen over time is that year to year it (the number of FHA loans in Idaho) go down little bit,” Jones said. “When times are good we are about 5 or 6 percent of the market. We aren’t too big and aren’t too small.”
Idaho’s home prices increased 0.3 percent from August to September, and have risen 7.7 percent since September 2015.
According to Realtor.com, the median home price across Idaho is now $170,000.
The national median existing-home price for all housing types in October was $232,200, according to the National Association of Realtors. The FHA loan limit for a single family house is now $275,665.
U.S. home prices rose again in October as buyers bidding for scarce properties drove prices higher.
The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index rose 5.1 percent in October from a year earlier, after climbing 5 percent in September. Prices for the 20 cities are still 7.1 percent below their July 2006 peak.
The broader Case-Shiller national home price index was up 5.6 percent in October and has fully recovered from the financial crisis.
Home sales and prices have been helped by healthy demand, tight supplies and low mortgage rates.
The National Association of Realtors said last week that fewer than 1.9 million homes were on the market in November, down 9 percent from a year earlier.
The tight supply pushed the median price of existing homes to $234,900 last month, up 6.8 percent from a year ago.
But the cheap loans may be vanishing. The rate on the benchmark 30-year, fixed-rate mortgage last week reached 4.30 percent, the highest since April 2014.
Rates have surged since the Nov. 8 election of Donald Trump. Investors have bid rates higher because they believe the president-elect’s plans for tax cuts and higher infrastructure spending will drive up economic growth and inflation.
And the Federal Reserve, citing improvement in the U.S. economy, this month raised short-term U.S. interest rates for only the second time in a decade.
There’s one exception to the statewide application of the increases in Idaho — traditionally, Blaine, Camas, Lincoln and Teton counties have been considered high-cost areas. As a result, FHA mortgage insurance limits are higher there because of the higher-priced markets.
Today someone in Blaine, Camas, Lincoln and Teton counties who wants to buy a single-family home can borrow up to $636,150 with an FHA-backed loan. Last year, that limit was $10,650 lower.
Since its creation during the New Deal, FHA has insured 262,625 mortgages in Idaho.