A lot of sellers right now are all excited about the thought of receiving multiple offers on their home, thus driving up the sale price. This sure sounds like a good deal, but there is one real deal breaker lurking – the appraisal.

The appraisal is a tricky thing. If your buyer is getting an FHA loan, that appraisal will stick with your home for the next six months. This means, if it comes in low, that will be the appraised price for any other FHA buyer for the next six months. If you lose the buyer because of the low appraisal you need to either lower your price or find a buyer with conventional financing or cash. A buyer with a conventional loan may also run into a low appraisal but it will not be stuck with your home like an FHA appraisal.

Do you have other options if the appraisal comes in low? You sure do! You can keep that buyer and just lower your price to the appraised value. The buyer may be able to bring more cash to the table, or you may have a combination of those two options.

Because of the low inventory levels, buyers are ending up in multiple offer situations all the time but that does not necessarily mean your home is worth more money.

For the week ending March 29, mortgage applications for home purchases were up almost 7%, but this was most likely driven by the increased cost of an FHA mortgage starting April 1.  Overall mortgage applications for home purchases are up about 4% over last year, while refinancing applications are starting to decline.  With the increases in home sales the 4% increase in mortgage applications is to be expected. Refinancing applications are also expected to decline as interest rates slowly start to inch upwards.

On April 1 this year the FHA mortgage insurance rate (MI) will increase on FHA loans.  If you are planning on getting an FHA loan with less than 20% down, this will affect your loan.  This is just general information, so please check with your loan officer to see how these changes will effect your financing when you purchase your home.

Right now FHA loans have 2 levels of MI:

• Up front MI which is 1% of the loan amount which can be added to closing costs or you can finance it by adding it to your loan amount
• Annual MI which is 1.1% of the loan amount if your down payment is 5% or more or 1.15% of the loan amount if your down payment is less than 5%. These annual fees are paid monthly

Effective April first the MI will change to:

• Up front MI will be 1.75% of the loan amount
• Annual MI will be 1.2% of the loan amount if your down payment is 5% or more or 1.25% of the loan amount if your payment is less than 5%

If you are shopping or a home and are using FHA financing, you need to be under contract by April 1, 2013 to get the current MI rates.  Please consult with your mortgage loan officer for more information.