December 28, 2022
Are you making plans to buy a home with an FHA mortgage in the new year?
Your timing might be better than you think; housing markets are cooling which may lead (over time) to lower prices, decreased demand for houses on the market, and more negotiating power for the buyer.
But there are a few important questions.
How long does the market improve before we see conditions begin to level off? There is no way to predict what might happen going forward, and it’s important to compare and ask lenders about what rates might do in the months leading up to your FHA loan application in 2023.
It is unrealistic to expect your lender to be a fortune teller, nobody knows when home loan interest rates might recover closer to 5%, for example.
Will you need to consider buying interest rate discount points for your FHA mortgage? That depends on your financial needs and goals.
Some borrowers won’t need to buy points, usually because these buyers plan to sell before the loan term–long before.
Other house hunters may be purchasing a home with plans to keep it for the full duration of the mortgage, and that’s when points become more useful.
There are other ways to reduce costs on the loan. A first-time home buyer incentive (such as a down payment assistance program) offered by a local agency may help. While some are aimed at low-income borrowers, not all of these options are need-based.
Other questions to ask your loan officer before you fill out paperwork? How long until you can apply for a cash-out refinance to tap into the equity you build up in the home over time.
Refinancing isn’t a choice all borrowers make. Some buy a home knowing they will want to refinance because they anticipate home improvement projects.
Granted, home improvement is not the only reason to consider an FHA refinance option, but many borrowers purchase homes wondering how long it will be before investments in the home are needed in the form of replacement appliances, roof repair, a new HVAC system, etc.
If you are thinking of cash-out refinance options for other reasons, ask your FHA lender what makes the most sense based on your goals for the money. You may find some loans are better for certain purposes than others–knowing which is the best for your purposes and why makes for a more informed decision.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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