Qualifying to buy a $200,000 home in Seattle
I’m working with a first time home buyer who’s interested in buying a home priced around $200,000 in the greater Seattle area. I thought I’d share some of the programs we have available at Mortgage Master Service Corporation that may help her accomplish her home buying goals.
“Betty Bellevue” has excellent credit and is looking for a detached single family dwelling (not a condo). She’d like to have a total mortgage payment of less than $1300.
NOTE: Please keep in mind when reviewing rate quotes below that Mortgage Master Service Company does not factor rate credit rebate into APRs. Therefore, all of the closing cost may be paid by rate rebate, leaving the buyer with zero closing cost, however, the apr’s below will not reflect that.
Mortgage rates quoted are effective as of November 1, 2012 at 10:30 am and may change anytime.
Property taxes estimated at $188.27 and home owners insurance estimated at $50 per month.
FHA is a program that allows for minimum down payment of 3.5%, which can be gifted from family. FHA has both monthly and upfront mortgage insurance. This program is available for home buyers with credit scores of 640 or higher. Debt-to-income ratios may go beyond 45% with compensating circumstances. Sellers can currently contribute up to 6% of the sales price towards bona fide closing cost and prepaids (buyer must pay down payment).
FHA 30 year fixed with 5% down payment has a PIMI payment of $1029.63 (PIMI = principal, interest and mortgage insurance) based on a rate of 3.250% (apr 4.132). Current pricing has enough rebate rate credit to cover all closing cost, prepaids and reserves leaving just the down payment of $10,000.
FHA 30 year fixed with 3.5% down payment of $7000, has a PIMI payment of $1053.83 based on a rate of 3.250% (apr 4.190).
Conventional conforming financing with less than 20% down payment will require private mortgage insurance. The maximum debt to income ratio is 45%. In my opinion, home buyers should consider this program if they have excellent credit and steady salaries. It can be more challenging to qualify for than FHA. Since Betty Bellevue has both excellent credit and employment, conventional financing is worth her consideration. Betty Bellevue will need to contribute at least 5% of her own funds towards down payment, the remainder of the funds may be a gift from family.
Conventional 30 year fixed with 5% down payment has a PIMI payment of $970.35 based on a rate of 3.500% (apr 4.054). Estimated closing cost (after rebate credit) are $1900, not including prepaids/reserves.
Conventional 30 year fixed with 5% down payment using split premium mortgage insurance (similar to FHA, except at a reduced rate) has a PIMI payment of $907.01 based on a rate of 3.500% (apr 3.901). Estimated closing cost are $3800, after rebate rate credit. With split premium mortgage insurance, the upfront premium cannot be financed (FHA borrowers typically finance the upfront MI).
Fannie Mae Homepath is a special program that’s only available for specific homes designated by Fannie Mae. Homepath does not require an appraisal and allows down payments as low as 3% with no borrower paid mortgage insurance. This is a conventional Fannie Mae mortgage program for homes owned by Fannie Mae (foreclosures). Down payment may be a gift from family members.
30 year fixed with 5% down payment has a principal and interest payment (no mortgage insurance) of $907.09 based on a rate of 4.000% (apr 4.107). Closing cost, excluding prepaids and reserves) are estimated at $2865.
30 year fixed wtih 3% down payment of $7000 has a P&I of $982.97 based on a rate of 4.500% (apr 4.597). Closing cost are estimated at $2330, excluding prepaids and reserves.
If Betty Bellevue was considering buying in an area designated as rural by USDA, she could consider a zero down USDA home loan. Properties must be in USDA’s designated rural area and her household must have meet income limitation requirements.
A zero down VA home loan would be an option if Betty Bellevue had served our country in the military.
If you’re considering buying your first home located anywhere in Washington state, I’m happy to help you.