For a few months now, we at the Arkansas Realtors® Association have stressed the notion that there are a lot of advantages right now for home buyers that will likely be gone soon.

In other words, if you’re thinking about buying a house, you may regret it if you wait rather than start shopping. That line has been repeated a few times, but what does it really mean?

It’s not much good to tell a prospective buyer something like that without the proof to back it up, so here’s a summary of some advantages that exist right now that will be gone soon:

* Tax credits for repeat and first-time home buyers. People who have purchased homes before can get a tax credit up to $6,500 and first-time buyers can claim up to $8,000. Those credits expire at the end of April and anyone expecting those credits to be extended may be disappointed. In other words, if you don’t have a home under contract by the end of April and close on it before July 1, you’ll probably miss the boat.

* Low interest rates. According to Zillow.com, the average, national interest rate on a 30-year, fixed mortgage is 4.89 percent today. Prior to November 2008, interest rates were coming around between 6 and 7 percent. What’s changed? The Federal Reserve announced around Thanksgiving in 2008 that it would start buying up mortgage backed securities. Since those securities are obviously tied directly to the mortgage market, reducing the risk associated with them translates into lower yields for investors and lower interest rates for borrowers.

The Fed has announced plans to stop purchasing those securities at the end of March after sinking an estimated $1.25 trillion into the mortgage backed security market. Economists, bankers and anyone else paying attention expect to see interest rates rise as a result.

* FHA changes. The FHA is broke and needs to raise money.

Well, it’s not exactly broke. However, Congress requires the FHA to keep at least 2 percent of the total value of mortgages it has insured on hand as cash reserves. The FHA has fallen well short of that requirement according to the latest numbers from the agency — it has on hand around 0.5 percent of the value of its $685 billion in insured loans.

So, the FHA needs to raise money. Since the agency backs a lot of of mortgages here in Arkansas (and everywhere else), you’d better believe we pay attention when the FHA starts talking about “reducing risk” and tightening lending requirements. How important are FHA loans to buyers? According to the National Association of Realtors®, 39 percent of Americans purchasing homes last year went through the FHA.

In April, the FHA will require buyers to pay more money up front for mortgage insurance. Right now, the FHA charges 1.75 percent of the value of the loan up front for mortgage insurance, but that amount will increase to 2.25 percent (an increase of $500 for every $100,000 borrowed) on April 5. FHA officials have said they would prefer to remove at least some of that increase next year if Congress gives them the authority to do so.

The FHA, see, requires buyers to provide both an up-front payment and a monthly payment for mortgage insurance. The agency has the authority to increase the up-front payment, but not the monthly one. The FHA has requested that authority in its fiscal year 2011 budget. Fiscal year 2011 starts at the first of October, so we at least know that an increased up-front payment for mortgage insurance will be in place until at least then.

So, that will increase closing costs for borrowers in (at least) the short term. Another thing that could increase up-front costs for buyers has to do with increased down payments for certain borrowers. In order to continue to take advantage of the FHA’s 3.5 percent down payment plan, borrowers will have to have a minimum credit score of 580. Borrowers with a credit score less than 580 will be required to put down at least 10 percent.

And then there are seller concessions to consider.  In April, the allowed concessions amount drops from 3 percent to 6 percent. What is a seller concession? Let’s say Joe Buyer wants to purchase a home for $100,000 but needs some help with closing costs. Fred Seller increase the sale price of the home by 6 percent to $106,000 and, at closing, writes Buyer a check for $6,000 to cover those up-front costs.

Under the new guidelines, Seller couldn’t borrow more than $103,000 — representing a concession of 3 percent — for a transaction backed by the FHA.

* Decreasing list prices. The secret is out — sellers are asking for less money these days than they did a few years ago. How long will that last? Who can tell, but it’s clear that buyers can get some pretty good deals right now. Have a look at our latest average/median list prices and inventories report. Notice a trend?

In sum, I’ve pointed out four advantages that buyers have now and three of them will probably be gone in the near future. If you’re looking to purchase a home, now is the time.

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