Fannie Mae to increase minimum down payment in November

Fannie Mae is scheduled to update their automated underwriting system (aus) Desktop Underwriter (DU) to DU Version 9.1 on November 16, 2013.  In their release notes from August 20, 2013, Fannie Mae reveals that for they will increase the minimum down payment from 3% to 5% for Fannie Mae conventional loans.

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How loan to values impact pricing for refinances, including HARP 2.0

I thought it might be interesting to share a few examples of mortgage rates that are available for rate-term refinance, including HARP 2.0, illustrating different loan to values. The loan to value is based on dividing the new loan amount by the value of the home. 

Rates quoted below are as of 8:00 am on September 5, 2012 and may change at any time. All rates are based on a 30 year fixed with a loan amount of $400,000 and credit scores of 740 or higher on an owner occupied home in the greater Seattle area assuming no existing private mortgage insurance.  If you would like your personal rate quote for a home located anywhere in Washington state, where I am licensed, please click here.

I’m also quoting rates that are as close to “par pricing” as possible. This means with as little rebate credit or discount points possible. If you would like to have your rate lower, you can pay discount points to reduce the rate. If you would like to have your closing cost reduced, the rate can be increased to create rebate credit.

For loan to values 80% and lower, I’m not quoting the HARP 2.0 program even though it may be available and often has reduced cost since the appraisal may be waived. Closing cost quoted below up to 80% include an appraisal fee of $500 – should the borrower elect for a HARP 2.0 refinance, the closing cost quoted below would be reduced by $500. HARP 2.0 is available for homes that were securitized by Fannie Mae or Freddie Mac prior to June 1, 2009, click here more information about HARP 2.0 mortgages in Washington.

Quotes in this section are scenarios we are able to close as a correspondent lender (we process, underwrite, draw loan documents and fund the loan from our credit lines at our King County office):

Loan to value (LTV) 60% or lower:  3.500% (apr 3.557) with closing cost (not including prepaids and reserves) estimated at $2432.

LTV 60.01% to 75%: 3.500% (apr 3.566) with closing cost estimated at $3432.  NOTE: The difference in closing cost is caused by the difference in pricing the rate (slight rebate or a discount).

LTV 75.01% to 80%: 3.500% (apr 3.586) with closing cost estimated at $4432. 

LTV 80.01 to 95%: 3.625% (apr 3.710) with closing cost est. at $4356 or 3.750% (apr 3.809) with closing cost estimated at $1708.

LTV 95.01 to 105%: 4.125% (apr 4.206) with closing cost estimated at $3932. NOTE: at this loan to value, this bank is permitting “same servicer” HARP 2.0 refinances only. Options thin out the higher the loan to value.

The quotes below are scenarios we are able to close by brokering to a lender who underwrites and funds the loan. Brokering high loan to value HARP loans have proven to take a lot of time and patience to close…I won’t sugar coat it. Closing cost below are assuming the appraisal has been waived. 

LTV 95.01% to 97%: 4.000% (apr 4.049) with closing cost estimated at $1504.

LTV 97.01 to 125%:  4.125% (apr 4.174) with closing cost estimated at $2004.

LTV 125.01 and higher:  4.125% (apr 4.206) with closing cost estimated at $4004.

The rates quoted above are merely a sample to illustrate the differences various amounts of home equity has when pricing a mortgage rate.  

If you would like a mortgage rate quote for your personal scenario on a home located anywhere in Washington, please contact me.

How Long Will PMI Stay on my HARP 2.0 Mortgage?

This is a question that I’m often asked by Washington  home owners who are considering refinancing their current conventional mortgage using the HARP 2.0 program. The answers I’ve received from private mortgage insurance companies vary from “it’s up to the mortgage servicer” to “when the new loans principal reaches 78% loan to value”.  

If your current loan to value is triple-digit because of being underwater, the thought of paying private mortgage insurance for years may not sound appealing. Here are some points I encourage my clients to consider:

  • determine when your existing private mortgage insurance is set to terminate. If it’s before December 2013 (assuming the HARP program is not terminated early, which Fannie and Freddie have reserved the right to do) you could consider delaying your HARP refi so that you won’t have PMI on the new loan.
  • compare your existing principal and interest payment (excluding the private mortgage insurance) to the proposed HARP payment including principal, interest plus mortgage insurance.  Many of my clients are saving hundreds of dollars each month – even with keeping their mortgage insurance.
  •  consider how long you plan on keeping your home and what your alternatives may be. If you are underwater and are planning on staying in your home or eventually converting it to a rental property, reducing your payment now may be beneficial. If you are planning on doing a short sale, then refinancing at this time would probably not pencil out.

With HARP 2.0 refinances, when you have private mortgage insurance, most pmi companies are transferring the pmi certificates over to the new lender without any issues. The pmi rates stay the same so if you’re currently paying private mortgage insurance monthly, you can estimate that the new pmi payment will be roughly the same with your new mortgage payment.   

If you have lender paid mortgage insurance, often times it was paid for upfront and there will be no private mortgage insurance for the home owner to pay. Sometimes the lender paid mortgage insurance (LPMI) was being paid monthly by the lender and in those cases, the pmi company may convert the policy to “paid monthly” so the borrower can assume it.

If you’re interested in a mortgage rate quote for a HARP 2.0 refinance for your home located anywhere in Washington state, contact me.

How an appraised value can impact the pricing of your refi

I’m working with a homeowner in the Wedgwood neighborhood of Seattle who’s interested in refinancing his existing 30 year fixed rate to a 20 year. Mortgage rates are so low that he’ll actually reduce his payment while not extending his mortgage term. The only real mystery is what the home may appraise for.

We have Zillow zestimates, taxed assessed value and we even have our own opinions on what our home should be worth. We don’t know the value the lender will use until the appraiser visits your home. (NOTE: some refinances, like an FHA streamline or HARP 2.0 may not require an appraisal).

The appraised value determines the loan to value (LTV) of the refinance. Loan to value is determined by dividing the loan amount by the appraised value.  The best pricing available is for LTVs 60% or lower.  If an appraisal comes in at a value that is lower or higher than estimated when the refinance was locked, the pricing may be adjusted if it falls into a different bracket. Conventional loans have what is called “LLPA”s (loan level price adjustment) which is essentially risked based pricing.

Here is an example of different price points based on a rate-term refinance for a 20 year fixed mortgage  with excellent credit.  Rates are as of 9:00 am, June 27, 2012 and may change anytime.

  • 3.500% (apr 3.636) with a loan amount of $213,700 and a loan to value of 60% or lower. This would require an appraised value of approx. $358k or higher. Principal and interest (P&I) payment is $1239.37 and net closing cost is $2652.86.
  • 3.500% (apr 3.647) with a loan amount of $213,700 and a loan to value of 60.01 – 75%. The appraisal came in at less than $358,000 to as low as $285,000. P&I is $1239.37. Net closing cost is $3187.11.
  • 3.500% (apr 3.676) with a loan amount of $214,700 and a loan to value of 75.01 – 80%. The appraised value came in below $285,000 to as low as $269,000. P&I is $1245.17. Net closing cost is $3724.89.

A loan to value over 80% may require private mortgage insurance or a second mortgage. For this Seattle home owner, I’d be quite surprised if his LTV came in below 80%.

If an appraisal comes in lower than expected and you want to keep your same pricing, you can always opt to bring cash in to closing in order to maintain your same loan to value.

If you’re interested in refinancing or buying a home located anywhere in Washington state, I’m happy to help you.