Some good news came out this week for potential homebuyers.

Did you see it?

I can’t blame you if you didn’t.

While the headlines continue to be dominated by news of increasing mortgage rates, falling home sales, economic uncertainty, and persistent speculation of a crash, this news would have been easy to miss.

What news am I talking about? Watch the following video, or continue reading below, to find out;

FHA Mortgage Insurance Premiums

FHA loans are one of the most popular options out there for people when buying a home.

Part of the appeal is the easier qualification criteria as well as the fact that you can purchase a home with as little as 3.5% down payment.

Anytime you're buying a home and putting less than 20% down, you are required to have mortgage insurance, which is known as MIP (Mortgage Insurance Premium).

MIP is an insurance policy that protects the lender in the case of a default that you, the borrower, have to pay for since you are putting less than 20% down.

MIP is charged as a percentage of the total loan amount and is included in your monthly payment.

The Good News here is that FHA announced this past week that in the last few days that they have lowered the mortgage insurance premium percentage down to 0.55%, and that's a big deal because it saves you money.

So what does that mean in actual dollars?

On a $400,000 purchase, your payment's now $98 a month cheaper
$450,000 purchase, $110 cheaper
$500,000 purchase, $122 cheaper

While this savings amount probably won’t be enough to determine whether to buy or not buy, every little bit of savings helps.

Mortgage Rates

As I’m sure you know, after falling to approximately 6%, mortgage rates have been on the rise the past few weeks, leaving many to wonder where they might be heading.

There’s reason to believe mortgage rates will be coming back down in the weeks and months ahead, however.

As you might recall, mortgage rates are not directly impacted by the actions of the Federal Reserve, but are actually tied to the 10-year Treasury Bond Yield.

This chart, from Freddie Mac, shows the relationship between the 10-year Treasury yield and 30-year mortgage rate over the past 50 years;

As you can see, the average spread between the two has been 1.72%.

Whenever the spread has dropped below or gone above, this average, it has always found its way back to this average over time.

Here is what the spread between the 10-year Treasury yield and 30-year mortgage rate has looked like so far in 2023;

We started the year at a spread of 2.705% and currently have a spread of 2.930%.

This spread is also known as the fear factor. The more fear and uncertainty that exists about the economy, the larger the spread becomes.

With continuing talk of a housing market crash, recession, and general uneasiness about where things are heading it’s no surprise there is more fear than normal in the market currently.

The belief and expectation is that the spread will start to move towards its historical average and mortgage rates will once again start to fall.

Now Might be a Great Time to Buy

Wait, what?

This is all a matter of perspective so stay with me for a minute.

It’s true that mortgage rates will most likely fall in the months ahead. What’s much less certain is if, or by how much, home prices will fall over the coming months.

Home prices in Frisco and Prosper, after falling last summer, have been relatively stable since September 2022. Up a little in some months and down a little in others.

Supply relative to demand is what controls home prices and our overall supply remains tight.

Every time there is an increase in mortgage rates there is usually a report of a drop in mortgage applications. Makes sense as potential buyers start to adopt a wait-and-see attitude.

Saying that the new home builders continue to offer incentives and are anxious to keep properties moving. With that in mind, while there are temporarily fewer buyers in the market, there is a greater opportunity for those still willing to buy to find, and negotiate the best deals.

The best part is, when mortgage rates do fall, the opportunity to refinance at a lower rate always exists and many lenders are currently offering to do that at no charge to the borrower.

If you have additional questions, or a specific situation you would like to discuss in more detail, please schedule a call as I’d be more than happy to discuss this with you in more detail.