Dramatic Changes proposed to USDA Rural Loans effective October 1, 2011

Beginning October 1, 2011, USDA Rural Loans may an have annual mortgage insurance (like FHA, paid monthly) and will reduce the upfront guarantee fee on purchases from 3.5% to 2%.  RD AN No. 4551 states:

Beginning October 1, 2011, it is anticipated that all purchase loans transactions will be charged (1) an up-front guarantee fee equal to 2% of the loan amount and (2) an annual fee of 0.3% of the unpaid principal balance.

Unlike FHA insured loans where the annual mortgage insurance premium ceases after 60 payments and the principal balance reaches 78% loan-to-value based on the original sales price or appraised value, USDA's annual fee NEVER terminates. It will remain a part of the monthly payment until the USDA mortgage is paid off.  The annual fee will be reduced each year as it is calculated annually from the principal balance. 

Here's a comparison: 

Currently, if someone was using a USDA zero down loan to purchase a home in Duvall for $300,000, their loan amount would be $310,500 (sales price plus 3.5% for the upfront guarantee fee).  Based on current rates of 4.375% (apr 4.786), their payment (excluding taxes and home owners insurance) would be $1550.28.

Effective October 1, 2011 and assuming mortgage rates just happen to be the same, the loan amount would be $306,000 (sales price plus 2% for the upfront guarantee fee) creating a principal and interest payment of $1,527.81 PLUS an estimated monthly premium of $75.82 = $1,603.63.  An increase of $53.35 per month!

Why would someone even consider having a USDA mortgage after October 1, 2011? Well for one, it's one of the few "zero down" mortgage programs available for homes that are located in a designated rural area (like Duvall, Gig Harbor or Maltby).  If the appraisal comes in higher than the sales price, borrowers may be able to finance closing cost… there are some perks to this unique program and it may be worth your consideration if you're income meets the guidelines and you're buying a home in a rural community.

Questions about USDA or other types of mortgage programs for homes located in Washington State? Contact me, I'm happy to help!

Having a Hard Time Finding the “Perfect” Home in Seattle? Consider an FHA 203k Rehab Loan!

Some of my Seattle area clients have been searching for the “just right” home for months.  With a good portion of the available inventory being bank owned, many of the homes have been left in less than desirable condition or perhaps are overdue for a little TLC. If you’ve found a home that needs some work that’s located in a neighborhood you’d like to call home, an FHA 203k rehab loan may be worth your consideration.

FHA 203k loans allow a borrower to finance almost anything to improve the home (exceptions are luxury items, such as swimming pools, hot tubs, fire pits, etc.). Improvements that are allowed are:

  • structural alterations and reconstruction
  • modernization and improvement to the home’s function
  • elimination of health or safety hazards
  • changes that improve appearance and eliminate obsolescence
  • reconditioning or replacing plumbing; repairing or installing a well and/or septic; repairing/replacing electrical issues
  • adding, repairing or replacing roofing, gutters and downspouts
  • adding or replacing floors and/or floor treatments
  • major landscape works and site improvements
  • enhancing accessibility for a disabled person
  • making energy conservation improvements
  • room additions

The cost of the improvements are added to the sales price of the home.  For example, if you find a fixer with a sales price of $250,000 and it needs $40,000 in repairs or improvements, you can finance up to 96.5% of $290,000 (FHA loans currently have a minimum down payment of 3.5%).  

Many home buyers might buy a “fixer” knowing they can do a lot of the work “down the road” or as they can afford it.  With an FHA 203k rehab loan, the work is done after closing and financed with the “purchase money” first mortgage.  This means you’ll have the benefit of current low FHA rates instead of financing improvements with a Home Depot or Lowes credit card, not to mention the income tax benefits.

I recommend starting with a prequalification to see how much mortgage payment you are comfortable with and that you qualify for.  If you’re buying a home anywhere in Washington, I can help you.  Once you know what you qualify for, you can start shopping for homes that you’d like to improve (it doesn’t need to be a foreclosure or a total fixer). By the way, if you need a recommendation to a real estate agent, please let me know.

Once you’ve found a home that you’re interested in, it’s not too early to meet with a HUD approved consultant for a feasibility study. In fact, you can do this before you’re in contract.  This step is very important.  The consultant will help you identify what items HUD will require to be repaired to meet lending standards and make recommendations for improvements and consider your “wish list” for items to be done to the home.  You also want to make sure not to “over improve” your home for the area as the finished product will need to appraise for the adjusted sales price (sales price plus improvements and cost of the 203k loan).  A qualified consultant can help guide you through this part of the process and I’m happy to recommend someone if you’re buying a home anywhere in Washington.

FHA 203k loans tend to take a little longer to process and close than a standard FHA transaction. The total loan amount (sales price plus improvements) is limited to FHA loan loans which is currently $567,500 (until October 1, 2011) in King, Pierce and Snohomish Counties. 

Questions? Please contact me – your next home with your new kitchen is waiting for you. Mortgage Master Service Corporation is a Direct Endorsed HUD approved lender.

Click here for your personal mortgage rate quote for homes located in Washington.

Washington State FHA Loan Limits Reduced effective October 1, 2011

Unless Congress passes an extension of our current FHA loan limits soon, they're set to roll back to "HERA 2011" amounts effective on October 1, 2011 through the end of this year.  We won't know what 2012 will bring until around November (Fannie Mae has warned conforming loan limits could drift even lower as loan limits have been based on median home prices).  

King, Snohomish and Pierce Counties will see the FHA loan limit reduced by $65,000 to $506,000 from $567,500.   Kitsap County will be hit with the largest drop with their loan limit being reduced $167,950 to $307,050 from $475,000.

Here's a list of counties in Washington that will be impacted with reduced FHA loan limits as of October 1, 2011 (see HERA Limit and click for larger image).

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Conforming loan limits and VA loan limits are also set to be reduced as of October 1, 2011.  If you are considering refinancing your mortgage and the loan amount is above loan limits that will be in effect after September 30, 2011 (possibly sooner as lenders will create their own overlays to protect themselves from being stuck with a "jumbo" loan) you may want to take action NOW.

I'm licensed to assist you with mortgages on homes located anywhere in Washington state.  Please contact me if I can help you!

Ben, the Fed and Mortgage Interest Rates [Live Post]

Today the Fed will announce if they're going to change the Fed Funds rate. It's highly anticipated that they will leave the rate where it's currently at.  What ever action the Fed takes does not directly change mortgage rates, however it does have a strong INFLUENCE on mortgage rates.  Following the Fed's announcement, Ben Bernanke will be holding a press conference which may also impact mortgage rates. Remember, mortgage rates are based on mortgage backed securities (bonds) and inflation will drive mortgage rates higher.  

This is a live post to illustrate how the Feds actions may impact mortgage rates, assuming the markets don't shrug off the information.

As of 9:00 am this morning, prior to the Fed's monetary decision and MBS (FNMA 30yr 4.00%) are up 34bps.  What you and I probably relate to more than mortgage backed securities (MBS) are how this translates to mortgage rates. 

I can lock in a 30 year fixed at 4.375% (based on the criteria I use for rate quotes) with a discount of 0.198% (apr 4.503).  

5/1 ARM is currently at 2.875% (apr 3.256) with a discount of 0.043%.  5/1 ARM is fixed for 60 months and has caps of 5/2/5.  The highest this rate can be at the 61st payment (or the life of the loan) is 7.875%. 

11:10 am: we're minutes before Ben Bernanke's news conference.  Mortgage rates that I've quoted are unchanged.

9:25 am: DOW is down about 7 points.

"No change" to interest rates is announced.  The Feds Funds rate is unchanged at 0 – 0.25%.  Good news to those who have home equity lines of credit which are based on the prime rate, they've dodged another bullet!

Initial reaction: markets seem unmoved. No real surprises in the FOMC press release.

9:31 am: Receiving an intraday rate sheet with pricing for the better from one of the lenders we work with.  This lender did not have as competive pricing as what I quoted above (they're still far from it) as the began the day with worse pricing. The rate quotes above is still current pricing that I have available.

9:50 am: In just over an hour, we'll hear from Fed Head, Ben Bernanke.  Stay tuned. I'll continue to share rate updates and updating this "live" post.

10:30 am: MBS down to session lows at 15bps for the 30yr.

11:10 am: minutes before Ben Bernanke's news conference and mortgage rates are unchanged from what I've quoted above.  DOW is up 7.46.

12:15 pm: Ben Bernanke has wrapped up the news conference.  MBS are up slightly to 22bps with the DOW down 32. Mortgage rates and pricing that I quoted above are unchanged.

I listened to as much of Bernanke's conferene as I could while I was work on my day job, originating mortgage on homes located in Washington.  Some bits that I extracted (and shared on Twitter) are that Bernanke referred to the pace of unemployment being "frustratingly slow".  During the Q&A he said that "we don't use words like "extended period" to be intentionally opaque, it means that we really don't know how long".  Regarding housing, he commented that "those who can get credit, can buy a lot more house than they could a few years ago" referring to low rates and affordable home prices. He would like to see further efforts from mortgage servicers to modify loans when appropriate and to speed up the foreclosure process when appropriate.

DOW closes down 80.34.  

Piggyback Combo Mortgages are Back

I’m pleased to announce that we now have second mortgages and home equity loans available in combination with a first mortgage at Mortgage Master Service Corporation. I see this being very useful with keeping loan amounts under conforming limits (especially once they’re scheduled to be reduced on October 1, 2011).  Here’s some quick points on this program:

  • maximum allowed total loan to value is 85% with a mid-credit score of 720 or higher for owner occupied.
  • maximum allowed total loan to value is 70% with a mid-credit score of 700 – 719 for owner occupied.
  • maximum allowed loan to value of 80% with a mid-credit score of 720 or higher for a second home.
  • available for purchases or refinances.
  • maximum allowed debt-to-income ratio of 45%.
  • available as a HELOC (home equity line of credit) or fixed rates.  

Should you consider using a first and second mortgage combo for your home financing? That’s up to you!  What’s important is knowing and understanding what options are available to you so you can make an informed decision.  If you are buying or refinancing a home located anywhere in Washington state, I’m happy to help you with your mortgage needs. 

Car Art Show in West Seattle

An Art Car Party is going on behind the Feedback Lounge (and Zeeks Pizza) until around 8:30 tonight and is worth the visit in you’re in the in West Seattle neighborohood.  NOTE: I’ll post more pictures as soon as I can (I’m in the process of making a Father’s Day dinner for my hubby).  Link posted below to more pictures.

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Hat tip to Marlow Harris, her Elvis Traveling Museum is pictured below.

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This is the “Yarn Car”.

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UPDATE: Check out all of my photos of the amazing art cars by clicking here.

 

Happy Father’s Day

DadJanetteNikkiBigWheel
Wishing all Dads a very Happy Fathers Day.

 

Fannie Mae Homepath Buyer Incentive Extended Once Again

Fannie Mae is extending their buyer incentives of 3.5% towards closing cost on qualified Fannie Mae homes through October 31, 2011.  In addition, they're also offering real estate agents a selling bonus of $1,200.   

Here are some details for qualifying for the Fannie's Homepath Mortgage special (from the Homepath website):

  • Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.
  • The initial offer must be submitted on or after June 14, 2011 and close by October 31, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.
  • The sale must close on or before October 31, 2011. No exceptions will be made to this deadline.
  • Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.
  • Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
  • If a buyer's total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.

Don't forget, the Fannie Mae Homepath Mortgage does not require an appraisal and there is no private mortgage insurance for credit scores over 660.   Fannie Mae will lend up to the high balance conforming loan limit, which is currently $567,500 in the greater Seattle area (this loan limit is set to be reduced October 1, 2011).  For more information about Fannie Mae's Homepath Mortgage, click here.

Homepath We are pleased to offer the Fannie Mae Homepath Mortgage for homes located anywhere in Washington.  Here's an example of rates effective as of June 16, 2011 at 9:45 am for this home located in the Crown Hill neighborhood in Seattle offered at $408,000 based on a credit score of 740 or higher and utilizing the 3.5% credit towards closing cost closing in 30 days.  With the closing cost credit, home buyers can purchase qualified Homepath properties with just their down payment.

With a 3% down payment of $12,240, the 30 year fixed rate is currently 5.00% (apr 5.232). The principal and interest payment is $2,124.53 – remember there is NO private mortgage insurance!  

With a little extra down payment of $20,400 (5% down), the rate improves to 4.750% (apr 4.978) with a principal and interest payment of $2,021.91.

A down payment of 10% currently provides a rate of 4.625% (apr 4.584) with a principal and interest payment of $1,887.92.

Adjustable rate mortgages are available with this program too.

If you would like a rate quote or are interested in getting preapproved for a Fannie Mae Homepath mortgage, please contact me!