Several upcoming changes will soon increase the cost of buying a home.

Fed will stop buying mortgage back securities on March 31st, 2010

The Fed has purchased $1.25 TRILLION (yes, Martha, that’s a “T”) of MBS in a successful effort to keep mortgage interest rates low and thereby “stimulate” the economy.

No one knows for sure, but removing this “liquidity” from the mortgage market is forecast to result in mortgage interest rates rising to as high as 6% by the end of 2010.

For example $200,000 mortgage, going from a 5% to a 6% interest rate increases your monthly payment by $125, which totals a stunning $45,000 over the term of a 30-year mortgage.

But, if you only keep your home for the typical 7 years, that 1% increase in your interest rate will only cost you $10,500.

First Time Home Buyer Tax Credit ends April 30th , 2010

This incredible (free money to first-time homebuyers!) program has helped thousands of Boise first-time homebuyers, with roughly 65% of all Ada County home sales occurring in the under-$200,000 price range.

Upfront Mortgage Insurance Will increase FHA on April 5, 2010

It will rise from the current 1.75% to 2.25% of the loan amount, which will increase the buyer’s closing costs by $1,000 on a $200,000 loan.

FHA Monthly Mortgage Insurance Will Rise April 5, 2010

This will also increase the borrower’s monthly payment.

Looking For The Bottom

Waiting for “the bottom” could end up costing you dearly because your increased financing costs could easily exceed what you (might) save by waiting for a lower price.

If you’re buying a home for the long term as your personal residence, this may be as good as it gets.

Source:RE News