North Dakota Median Home Values Skyrocket, Eligible for FHA Refinancing
By: Michael Foster | November 19th, 2012
Thanks in part to the oil boom that has kept North Dakota’s economy strong even as the rest of the nation struggles, home values in the state have soared by over 16% in some parts of the state. According to a study conducted by the National Association of Realtors, the median price for an existing single-family home in Bismarck jumped from $166,700 in the third quarter of 2011 to $193,500 in the third quarter of 2012. If home values continue to rise on this trend line, median home values in the capital could rise to over $200,000 by the beginning of 2012.
Other regions in the state saw slower appreciation, but most areas in the state saw home values rise. In Fargo, home values increased from $150,900 to $157,600, an increase of 4.4%. This means that even in slower appreciating metropolitan areas in the state, home values are outpacing the rate of inflation.
Few other parts of the country are seeing home values rise as quickly as in North Dakota, and most of those that are, such as Phoenix, Arizona, are rising quickly only after property values fell by as much as 85%. North Dakota was one of the few regions in America where home values were not hit by the sub-prime mortgage crisis.
For existing homeowners, the appreciation in home values has made it tempting to refinance a so-called “cash out” loan, where you essentially trade in your equity in your home for cash that can be used for renovations or some other personal expense. The Department of Housing and Urban Development allows FHA-guaranteed loans to be refinanced with this cash out option as long as the homeowner is current on the payments and has remained current for the past 12 months. These cash out loans can include significant closing costs and not all lenders will offer them. An alternative for homeowners who are looking to lower their monthly payments to take advantage of the record low interest rates on offer for home mortgages today can consider an FHA streamline loan if they have an FHA loan in place. To qualify, they need to be current on their existing mortgage and have made on-time payments for the last year.
The costs associated with an FHA streamline refinance have fallen substantially since there is no appraisal requirement and upfront insurance premiums are 0.01% for loans that were endorsed prior to June 1, 2009. This means a $200,000 loan can be refinanced with upfront premiums of just $20. Ongoing mortgage insurance is levied for these same existing loans at 0.55% of the loan, which is almost half as low as the current rate of 1%. This means homeowners will save both thanks to lower interest rates and lower insurance premiums from FHA.
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