Happy New Year

Mortgage Master Service Corporation is closed today in observance of the holiday.  We will reopen for business as usual on Monday, January 3, 2011.

We wish you a healthy, happy and prosperous 2011.

Adjustments to Conventional Mortgage Pricing Means Higher Rates on January 1, 2011

UPDATE DEC 19, 2013: New (more expensive) LLPA’s have been released.

UPDATE JAN 3, 2011:  Not all lenders are implementing this fee increase (yet).  This is perfect example of an advantage of working with a correspondent lender since we work with more than one bank or one banks products/rates. 

Conventional mortgages (Fannie Mae and Freddie Mac) are increasing their LLPA, also known as “Loan-Level Price Adjustment” effective on all mortgages with a term greater than 15 years on loans they purchase on April 1, 2011 or later.   Although this doesn’t go into effect until April Fools, wholesale lenders will make these adjustments to their rate sheets well in advance so that they don’t have to take the price hit when the sell the loan to Fannie or Freddie.   I am receiving memos from the lenders we work with stating that these price adjustments will go into effect on loans locked January 3, 2011.

The new price adjustments are outlined in the red box below.  The changed adjustements are in bold in the red box (click on image to enlarge).  You can view Fannie Mae’s complete LLPA schedule here – there are additional hits that may apply depending on your scenario (such as condos, subordinate financing, etc.).

FannieLLPA

LLPA’s are nothing new.  We’ve had them for the past couple of years and the adjustments are typically factored into your rate.  Remember, typically (but not always) 1% in fee equals 0.25% in rate.   So if your “low-mid” credit score is 700 – 719 and your loan to value is 75.01% or higher, your interest rate is going to be about 0.25% higher in rate than someone with a 740 or higher credit score with a loan to value of 60.01 – 75%.

The hardest hit with this adjustment is borrowers with credit scores of 699 – 640 with loan to values over 80%.   These borrowers should consider FHA insured loans for financing which do not have the same level of price hits as conventional (at this time).

The best pricing is for borrowers with credit scores 700 or higher AND a loan to value of 60% or lower.   Borrowers with a 740 or higher credit score and less than 25% down payment or home equity will now be hit with a 0.25% adjustment.

These price hits impacts loan amounts of $567,500 or lower for homes located in King, Snohomish and Pierce Counties.   For a complete list of Washington state conforming loan limits, click here.

Risk based pricing is one more reason why people who are considering a mortgage, regardless of if it’s to purchase a new home in Seattle or refinance their existing home in Bellevue, should start early with the preapproval process.  Just being one digit off on your low-mid credit score may cost you.  A qualified mortgage professional can help you make the right moves with the goal of improving  your credit score if given enough time.

If you need a mortgage for a home located in Washington State, I’m happy to help you.  I’ve been originating mortgages at Mortgage Master Service Corporation since April 2000 and I’ve been licensed since 2007 (when mortgage originator licensing was first mandated in Washington).

Can Your Mortgage Originator Legally Take a Loan Application Next Week?

You may want to check with your preferred mortgage originator to make sure they have fully renewed their license for 2011.  If they have not, or if they started the process late and are waiting for their 2011 license from DFI, they might not be able to legally take a loan application next week.

Some mortgage originators are not required to be licensed.  Thanks to Congress, the SAFE Act allows mortgage originators who work for credit unions or depository banks (like Wells Fargo, Chase and Bank of America) to only be registered.  It's unfortunate that our elected officials did not create the SAFE Act to have the same standards for any mortgage originator who takes a residential loan application.

Washington State Mortgage Originators who are required to be licensed should check on DFI's website to make sure they have met all the steps required to originate loans in 2011.   If certain steps are missing, including the renewal being approved, DFI has it clearly flagged as "needed".  Some mortgage originators have yet to pay for their renewal fees which will also prevent them from taking a loan application as a licensed mortgage originator as of January 1, 2011.

NMLS 

I am fully licensed to originate mortgages for homes located in Washington State.  I received my 2011 license from DFI in mid-November.  

From DFI:

"As of [Dec. 22, 2010] 59% of Washington MLOs successfully renewed and have been issued their 2011 license.  This percent represents 4,381 individuals who will be working as MLOs come January 1st."

Note:  MLO = Mortgage Loan Originator. 

If you find your mortgage originator has not completed the steps to be NMLS licensed in 2011, it's possible that they may have decided to work for an institution that is not required to be licensed (depository bank or credit union) or perhaps they simply procrastinated.   If you find they're not fully approved to take an application in 2011 per this list, you may want to ask them directly what their plans are for the new year. 

Mortgage Originators (MLOs) who allow their license to expire may have to go through additional steps to renew and may be subject to additional fees. 

If you are a Washington State Mortgage Originator - do double check DFI's list to make sure you have everything set for 2011.

Last Mortgage Rate Post for 2010

Another short "holiday" week.  When traders are on vacation (or snowed in), we may see more volatility with rates with fewer people working in the bond markets, their actions tend to have more impact.  China increased a key lending rate by 0.25% which is impacting bonds as it's indicates inflation.  Inflation (or signs of) will drive mortgage rates higher.  Signs that our economy is improving will also cause mortgage rates to trend higher.  This morning's rate post has rates roughly 0.125% higher than what I posted last week.

Here are some of what's scheduled for release this week that may impact rates and I've also included county closures (for recordings):

Tuesday, December 28:   Consumer Confidence.

Thursday, December 30: Initial Jobless Claims, Chicago PMI and Pending Home Sales

Friday, December 31:  Happy New Year!  Mortgage Master Service Corporation will be closed in observance of Christmas.  All recording offices in Washington state are closed.

Rates posted below are as of 8:30 a.m. on December 27, 2010 and may have changed the moment this post was published.  The mortgage rates posted are priced based on a purchase transaction closing after December 12, 2010 and by January 27, 2011.

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). The conforming rate quote below is based on owner occupied with a mid-low credit score of 740 or higher, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000 single family dwelling (non condo). This scenario includes reserves (taxes & insurance) not being waived. Rates quoted are priced based on a 30-40 day closing with no prepayment penalties on any of the rates quoted below.

30 Year Fixed w/1 Point:  4.750% (APR 4.906%).  

15 Year Fixed w/1 Pt: 4.125% (APR 4.388%).  

10/1 LIBOR ARM 5/2/5 CAPS and 2.25 margin w/1 Pt: 4.375% (APR 5.731%).  The highest the rate could be at the first period at 120 months is 9.375% and the lowest is 2.25%.

7/1 LIBOR ARM 5/2/5 CAPS and 2.25 margin w/1 Pt: 3.625% (APR 5.848).  The highest the rate could be at the first adjustment period in 84 months at 8.625% and the lowest is 2.25%.

5/1 LIBOR ARM 5/2/5 CAPS and 2.25 margin with 1 Point: 3.125% (APR 6.117%). The highest the rate could be at the first adjustment period at 60 months is 8.125% and the lowest is 2.25%.

Conforming High Balance Rates. Pricing is based on the same criteria above except where the loan amount is $417,001 – $567,500 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $625,000 and a $500,000 loan amount. 

30 Year Fixed w/1 Pt: 4.875% (APR 5.024%) 

Jumbo/Non-Conforming. Loan amounts up to 1 million for ARMs and 1.5 million for the 30 year fixed. The quotes below are based on 740 or higher credit scores with 80% loan to value with a loan amount of $700,000.

30 Year Fixed with 1 point: 5.500% (APR 5.797).

7/1 ARM 5/2/5 CAPS and 2.25 margin priced with 1 Pt: 4.625% (APR 6.302%).  The highest the rate could be at the first adjustment period at 84 months is 9.625% and the lowest is 2.25%.

5/1 ARM 5/2/5 CAPS and 2.25 margin priced with 1 Pt: 4.250% (APR 6.541%).  The highest the rate could be at the first adjustment period at 60 is 9.250% and the lowest is 2.25%.

FHA. Pricing based on credit score of 660 or better and loan amounts up to $417,000 for FHA in King, Snohomish and Pierce Counties.  Scenario priced based on a $400,000 sales price with 3.5% down payment.  NOTE:  FHA ARMs are available too–contact me for your personal quote.

30 Year Fixed Priced w/0 pt: 4.750% (APR 5.464). 

FHA-Jumbo/High Balance. Pricing based on loan amounts from $417,001 – $567,500 for King, Snohomish and Pierce Counties with a 660 or higher mid-credit score.   Scenario below priced on a $585,000 sales price with 5% down payment (3.5% minimum down payment is currently available).

30 Year Fixed Priced w/0.5 pts: 4.750% (APR 5.474%).

VA. Pricing based on credit scores of 660 or better and based on loan amounts up to $417,000. (NOTE:  The King, Pierce & Snohomish County VA loan limit is $481,250.  VA Jumbo loans are also available).   NOTE: the VA loan limt for this area is increased to $500,000 for 2011.

30 Year Fixed w/1 Pt: 4.750% (APR 4.940%).

For more information on mortgage trends, visit www.seattlemortgageplanner.com

Mortgage interest rates on this post are quoted based on single family dwelling (non condo), includes reserves (taxes & insurance) not being waive and no prepayment penalties. 

This is just a small sample available of rates and products. This is not a guarantee nor is it a commitment of interest rate.  *For purposes of this post: "1 point" is 1% of the loan amount and would be reflected on Page 2, Section A of the new Good Faith Estimate. Unless the rate is bought down; there are zero discount points referenced which would be reflected on Section A, Page 2 (Your Adjusted Origination Charges) of HUD's Good Faith Estimate.   

Rates are as of December 27, 2010 at 8:30 a.m. and may change at any time. Available programs may change at anytime as well.  To see rates that I'm quoting "live" click here.

Merry Christmas and Happy Holidays

I wish you a very happy holiday season and hope you're surrounded with family, friends and loved ones.   Mortgage Master Service Corporation is closed today so that our employees can do just that.  We will reopen for business as usual on Monday, December 27, 2010.

 

What Determines How Much Home You Qualify For – Part 2: Funds for Closing

In Part 1 of this series, I reveal that home buyers qualify for the mortgage payment first based on their income.  The next major factor is the down payment and funds for closing.  Some may say that the down payment more important than the mortgage payment, however the down payment actually can be a variable; one may be able to obtain gift funds to increase a down payment.  You cannot change your income unless you add more qualified borrowers.

Funds for closing include your down payment (the difference between the mortgage loan amount and the sales price) and closing costs that are associated with obtaining the mortgage along with reserves (taxes and insurance) and prepaids (prorated interest, taxes and insurance).  Any funds used for closing must be “sourced” or documented and verified.   Gifts or loans from family members may be acceptable with the loan program, however the mortgage originator needs to know about them in advance (prior to the loan approval).   A seller may also contribute towards allowable closing costs as long as it’s agreed to in the purchase and sales agreement and it meets lender guidelines.  Generally, the greater the down payment (home equity), the more that is allowed for the seller to contribute.

Loan programs have different requirements for down payments.  If someone has a more siginficant down payment, they may consider conventional financing.   And VA and USDA loans still allow for zero down payment.  Currently FHA will still allow a 3.5% down payment.  If a home buyer wanted to purchase a home with a $200,000 sales price, the minimum down payment with an FHA insured loan would be $7,000 (3.5% x 200,000).  Most lenders are going to want to see a minimum of two months of the proposed mortgage payment in the bank after closing, so the borrower would actually need to show they have, at minimum, $7,000 plus two months proposed mortgage payments.   There are closing costs and prepaids in addition to the down payment of 3.5%.   After the buyer meets the minimum down required, it’s possible that the seller may contribute up to a certain percentage.  With an FHA loan, a seller can contribute up to 6% of the sales price towards closing costs and prepaids.  There is no limit with an FHA loan as to how much a family member can gift, as long as it meets documentation requirements.   

The key to funds for down payment is documentation.  Lenders will often use the ending balance of the statements and will require any large deposits shown on the statements to be documented.   Someone who shows having $20,000 in their bank account with $5,000 of deposits that they cannot explain, will be treated as if they have $15,000 in the bank.   “Cash” is typically not accepted by lenders.  If someone has never had any institutional account, they may have an exception but it’s up to the underwriter.

This is why after it’s determined how much mortgage payment you qualify for (which provides the total loan amount), your documented assets will determine how much sales price you qualify for.

If you are considering buying a home located in Washington State, I’m happy to help you determine how much you qualify for. 

VA Loan Limits for 2011

UPDATE:  VA loan limits will remain the same through the end of this year!

UPDATE December 6, 2011: VA Loan Limits for 2012 (lower than 2011).

Below are the loan limits for VA loans in Washington State for all loans closed January 1, 2011 through September 30, 2011 December 31, 2011.  

  • King, Snohomish and Pierce Counties:  $500,000
  • San Juan County: $468,750
  • Clallam County:  $417,500
  • All other counties in Washington state: $417,000

If a Veteran elects to purchase a home with a sales price higher than the loan limit, they're down payment is 25% of the difference between the loan amount above and the sales price.

Example:

A veteran purchases a home in Kitsap county with a sales price of $560,000.  

$417,000 (Kitsap county VA loan limit) x 25% = maximum guarantee and possible entitlement = $104,250.

$104,250 / $560,000 = 19%.  Since this is less than the 25% maximum guarantee, a down payment will be required. 

$560,000 x 25% = $140,000.  

$140,000 – $104,250 (maximum guarantee) = $35,750 required down payment.

The base loan amount for this scenario (not including the funding fee) is $524,250.

A Veteran can purchase this home with 6% down payment!

Zero down loans are also available as long as the sales price does not exceed the VA loan limit. 

Lenders have various limits as to how large of a VA loan they'll fund.  This is one reason why it's great to work with a company like Mortgage Master Service Corporation where we have several sources for government loans.   If I can provide you a quote for a VA loan on a home located in Washington state, please contact me.

Attention Sellers: you're really limited the chances of selling your home if you don't consider buyers who are using VA or FHA financing!

Last but not least, THANK YOU to those who serve and have served our country.

Mortgage Rates and Holiday Closures

Although this is a short week, it's packed full of economic reports to be released on Wednesday and Thursday.  Here are some of what's scheduled for release this week that may impact rates and I've also included county closures (for recordings):

Wednesday, December 22:  Existing Home Sales, Gross Domestic Product (GDP) and Chain Deflator

Thursday, December 23:  Personal Income Expenditure and Core PCE, Initial Jobless Claims, New Home Sales and Consumer Sentiment.  Pierce County Recorder's office closed.  Bond market closes early (11 am PST) for the holidays).

Friday, December 24:  Happy Holidays!  Mortgage Master Service Corporation will be closed in observance of Christmas.  All recording offices in Washington state are closed.

Rates posted below are as of 10:45 a.m. on December 20, 2010 and may have changed the moment this post was published.  The mortgage rates posted are priced based on a purchase transaction closing after December 12, 2010 and by January 27, 2011.

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). The conforming rate quote below is based on owner occupied with a mid-low credit score of 740 or higher, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000 single family dwelling (non condo). This scenario includes reserves (taxes & insurance) not being waived. Rates quoted are priced based on a 30-40 day closing with no prepayment penalties on any of the rates quoted below.

30 Year Fixed w/0.5 Points:  4.750% (APR 4.857%).  

15 Year Fixed w/1 Pt: 4.000% (APR 4.333%).  

10/1 LIBOR ARM 5/2/5 CAPS and 2.25 margin w/1 Pt: 4.375% (APR 5.731%).  The highest the rate could be at the first period at 120 months is 9.375% and the lowest is 2.25%.

7/1 LIBOR ARM 5/2/5 CAPS and 2.25 margin w/1 Pt: 3.500% (APR 5.786).  The highest the rate could be at the first adjustment period in 84 months at 8.500% and the lowest is 2.25%.

5/1 LIBOR ARM 5/2/5 CAPS and 2.25 margin with 1 Point: 3.125% (APR 6.117%). The highest the rate could be at the first adjustment period at 60 months is 8.125% and the lowest is 2.25%.

Conforming High Balance Rates. Pricing is based on the same criteria above except where the loan amount is $417,001 – $567,500 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $625,000 and a $500,000 loan amount. 

30 Year Fixed w/1 Pt: 4.875% (APR 5.024%) 

Jumbo/Non-Conforming. Loan amounts up to 1 million for ARMs and 1.5 million for the 30 year fixed. The quotes below are based on 740 or higher credit scores with 80% loan to value with a loan amount of $700,000.

30 Year Fixed with 1 point: 5.500% (APR 5.797).

7/1 ARM 5/2/5 CAPS and 2.25 margin priced with 1 Pt: 4.500% (APR 6.241%).  The highest the rate could be at the first adjustment period at 84 months is 9.500% and the lowest is 2.25%.

5/1 ARM 5/2/5 CAPS and 2.25 margin priced with 1 Pt: 4.125% (APR 6.446%).  The highest the rate could be at the first adjustment period at 60 is 9.125% and the lowest is 2.25%.

FHA. Pricing based on credit score of 660 or better and loan amounts up to $417,000 for FHA in King, Snohomish and Pierce Counties.  Scenario priced based on a $400,000 sales price with 3.5% down payment.  NOTE:  FHA ARMs are available too–contact me for your personal quote.

30 Year Fixed Priced w/1 pt: 4.625% (APR 5.082). 

FHA-Jumbo/High Balance. Pricing based on loan amounts from $417,001 – $567,500 for King, Snohomish and Pierce Counties with a 660 or higher mid-credit score.   Scenario below priced on a $585,000 sales price with 5% down payment (3.5% minimum down payment is currently available).

30 Year Fixed Priced w/0 pts: 4.750% (APR 5.521%).

VA. Pricing based on credit scores of 660 or better and based on loan amounts up to $417,000. (NOTE:  The King, Pierce & Snohomish County VA loan limit is $481,250.  VA Jumbo loans are also available).

30 Year Fixed w/1.25 Pt: 4.625% (APR 4.903%).

For more information on mortgage trends, visit www.seattlemortgageplanner.com

Mortgage interest rates on this post are quoted based on single family dwelling (non condo), includes reserves (taxes & insurance) not being waive and no prepayment penalties. 

This is just a small sample available of rates and products. This is not a guarantee nor is it a commitment of interest rate.  *For purposes of this post: "1 point" is 1% of the loan amount and would be reflected on Page 2, Section A of the new Good Faith Estimate. Unless the rate is bought down; there are zero discount points referenced which would be reflected on Section A, Page 2 (Your Adjusted Origination Charges) of HUD's Good Faith Estimate.   

Rates are as of December 20, 2010 at 10:45 a.m. and may change at any time. Available programs may change at anytime as well.  To see rates that I'm quoting "live" click here.