I'm working with a couple who have saved $45,000 to buy a home in the greater Seattle area. Since conforming and FHA loan limits have been reduced to $506,000 in King County for the remainder of 2011, it reduces what they could have purchased a month or two ago.
FHA. Using an FHA insured mortgage, the couple can buy a home with a sales price of up to $551,000 assuming the seller pays for their closing cost and prepaids or that rebate pricing is used to cover closing cost and prepaids (or a combo of both). The buyer must pay for the down payment with their own funds and gift funds are allowed by family for the down payment. This is a pretty straight forward $506,000 loan limit pluse the $45,000 down payment.
Conventional. $462,000 is the highest sales price with conventional financing based on using a conforming mortgage of $417,000 which would have the loan to value just over 90%. This scenario would also have private mortgage insurance which could be paid monthly, in a one time lump sum or as a "split premium" (a combo of both). With a loan to value of just over 90% means that the rate of private mortgage insurance will be much higher than if the buyers stick to a 90% loan to value. With a loan to value just over 90%, sellers are limited to contributing 3% towards closing cost.
If the buyers go this route, the maximum sales price they would qualify for with 10% down payment is $450,000 and sellers can contribute up to 6% towards allowable closing cost.
Conforming High Balance: Loan amounts from $417,001 to $506,000 in the Seattle area may go up to 90% loan to value with private mortgage insurance, however 10% of the funds (the down payment) must be the borrowers and gifts are allowed only after the borrower has met the 10% requirement. Conventional loan amounts over $417,000 don't appear to pencil out for this scenario.
NOTE: With conventional mortgages, if the gift from family is 20% or more, then there are no minimum required investments for the borrower.
VA. If my clients had served in the military and qualified for a VA loan, the maximum sales price in King County with a $45,000 down payment would be $680,000 assuming the sellers pay for all closing cost and prepaids or rebate pricing is used to offset the cost.
Technically, home buyers do not qualify for a "sales price". They qualify based on the total mortgage payment (income and debts) and based on what funds they have available for down payment will dictate how much "sales price" they can buy.
If you would like to see what sales price you qualify for or become preapproved to buy a home anywhere in Washington, please contact me.