Archives for July 2007

Are You Preapproved for an Interest Only Mortgage?

July 20, 2007 by Leave a Comment

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You better double check with your Mortgage Professional.  As of Sunday, July 22, 2007 underwriting guidelines are tightening up for interest only conventional (loan amounts $417,000 and lower) mortgages.

  • Fixed Rate Mortgages (ex. 30 year fixed with 10 year interest only payments) will be based on the full PITI payment using the Note Rate.  (If there is a temporary buy down, the qualifying is still based on the Note Rate).
  • Interest Only ARMs:  Qualifying is based on the full principal and interest payment (PITI) at the fully indexed rate (index + margin).
  • Negative Am. (deferred interest) ARMs:  Qualifying will be based on the full PITI at the fully indexed rate amortized over the full repayment term using the loan amount based on the amortization cap.   (I am not a fan of Option ARMs and I have never provided one to any of my clients.  For some people, they have probably been very successful tools…most of my clients, once they understood how the mortgage works, would opt for an interest only ARM instead of this mortgage).

So what does this mean?

Previous Guidelines:  If a buyer was preapproved using a 5/1 Interest Only LIBOR ARM based on an interest rate of 6.125% (note: this is NOT a rate quote and is only for purpose of illustrating the guideline changes) earlier this week qualified for a payment in the amount of $2041 (plus taxes and insurance), they could borrow $400,000.

New Guidelines:  The current index for LIBOR is 5.4 plus the margin of 2.375% for this particle loan program = a fully indexed rate of 7.775% for the same ARM mentioned above.   Qualifying the borrower for a $2041 payment based on a 30 year amortization at 7.775% means the borrower now qualifies for a loan amount of $284,200.

This will obviously have a dramatic impact on purchases and refinancing out of interest only products.   This is still very new and we’ll see if non-conforming products follow suit.

Here’s what you need to do:

  1. Agents:  Contact your Mortgage Professional today to see if you have clients who are preapproved for conventional financing with any interest only payments.   Confirm your buyer is still qualified.  (Your LO may need to check Fannie Mae guidelines).
  2. Buyers/Borrowers:  If you’re using interest only products with loan amounts of $417,000 or less, contact your Mortgage Professional to verify you are still approved.
  3. Buyers:  Now more than ever, it’s crucial that you meet with a Mortgage Professional prior to buying a home to become preapproved.   With mortgage programs and underwriting “tightening”, there will be less options compared to just a few months ago.
  4. Buyers/Borrowers:  Having solid credit is also more important.   You should review your credit a couple times a year.  If your scores are below 680, work on improving your credit.
  5. Borrowers who currently have ARMs:  Do not wait until just before your ARM is about to adjust if you are considering retaining your home.   Contact your Mortgage Professional six months in advance to review your credit in case you need to make adjustments and/or repairs.

This is not the time to be hiding or not dealing with your mortgage…guidelines are changing quickly and you need to be proactive and responsible with your largest investment.   If you need help, find a qualified Mortgage Professional such as a Certified Mortgage Planning Specialist, who has been acquired additional training and education or get a referral from someone you trust and respect.

Filed Under: Adjustable Rate Mortgage (ARM), Interest Rates, Mortgage, Refinance, Residential Purchase

Ben Bernanke Bits

July 20, 2007 by Leave a Comment

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I have been glued to the television watching two days of testimony from Fed Chairman Ben Bernanke to the House and Senate.   Maybe I’m a mortgage nerd, I find this amazing.   

I’m convinced a majority of our elected officials are there just to grandstand and don’t have a clue about their personal mortgages!   Many of our representatives are treating Mr. Bernanke as if he personally doled out inappropriate subprime mortgages in an abusive fashion.    Other random tid-bits that I found interesting from the Q&A sessions are:

  • Bernanke mentions the "wealth effect" that home ownership provides Americans. 
  • The lower third of Americans have less than $500 in savings.   It is crucial to have at least 3 months of gross income in savings in the event of an illness, unemployment, etc.   
  • Bernanke stated that home owners with ARMs (adjustable rate mortgages) should call their lenders well in advance prior to their rate/payment adjusting.   I recommend calling at least six months prior to a scheduled rate increase to have your credit reviewed in the event corrections or repairs need to make sure you’re in the best position to refinance.
  • Suitability was defined by Bernanke as being more about affordability and the ability to repay a mortgage and less about selecting the right program out of the dozens or so available for a borrower.
  • Many borrowers took out mortgages without understanding the terms. 

I watched as much of the two day testimony as possible…ah, I’m glad I’m not Ben!

To read his prepared testiomony, click here.

Filed Under: Mortgage

Blog Tour USA in Seattle

July 20, 2007 by Leave a Comment

2 Bloggers on 1 RV with faces of bloggers plastered all over the exterior visiting 24 cities..Blog Tour USA will be arriving in Seattle next week on July 25.

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Ardell will be touring the guys from Sellsius around town to see our fine city and then she will host a dinner at her home in Kirkland.   I’m really looking forward to meeting Rudy and Joe of Sellsius and other fellow local real estate bloggers.   I’m bringing dessert for the event…sweet!

Filed Under: Travel, Weblogs

A Tribute to John Wickwire

July 19, 2007 by Leave a Comment

Johnwickwire_3I was very fortunate in my real estate career to have worked with many talented people. I began at Safeco Title in 1986…one year later, Chicago Title Insurance Company purchased Safeco and that’s when I first met John Wickwire.   I was maybe 19 or 20 years old and worked in the title unit that was next door to "Unit 2", where John was in command.   After a few years of being a Title Technician, I begged and pleaded to become a sales person (management wanted me to be at least 21 years old)…after a year as a home equity rep, I had the opportunity to call on mortgage and escrow companies in south west King County.  With all of John’s years in the title biz, we wound up sharing many accounts together.

John was like a Dad to all.  He probably sometimes cared too much about his co-workers.  His heart was always in the right place and his brain was a sharp as a tack.  He’s one of the few Title Officers who could quickly weigh out risk and make a decision that would make sense.   He was not the typical "text book" T.O.  After 5 years at Chicago Title, I moved to another title company to be paid commission and it would be another four years before our paths would cross again.

Chicago Title was starting a "boutique" title company in King County:  Washington Title Company.   I was one of the first people hired to start it (I was actually hanging around with four others waiting months for it to "open"…what was I thinking?!).   John came over once we were open as our first Title Officer and eventually became the Chief Title Officer.   He was a great addition to our maybe 8 or so employees at that time!  (Now Washington Title in King County has been renamed Ticor…and has a few more employees than when they started).

JohnJohn was a rock.  Everyone relied on his experience, brilliant mind, leadership and dry sense of humor.  He was old fashioned yet cutting edge at the same time.  You can ask anyone, John was the best.

John was born on July 19, 1947 and passed away on September 12, 2005.  He’s a Dad to three beautiful daughters.  There is not anything on this earth he was more proud of or had more love for.  Two of his daughters are pictured here with John on the day he received an award for his dedication and contributions to the title insurance industry.

On the corner of the bar at Pike Place Bar and Grill is a bronzed plaque reserving a seat for their favorite patron.   We miss you, John!   I just wanted to wish you a happy birthday and to let you know we think about you all the time.

Filed Under: People, Title Insurance

Affordable Kent Townhome

July 18, 2007 by Leave a Comment

Kohl_3This town home is conveniently located on the East Hill of Kent just off of 104th.    With a two-car garage, 3 bedrooms and 2.5 bathrooms…what else could you want?   How about a private fenced backyard…you can have it all.   

This home is offered at $307,000.

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MLS#27107903

24626 103rd Avenue SE, Kent, Washington 98030

Property taxes: $2,734

I’m not a real estate agent; I am a Mortgage Planner who is happy to help you finance this fine home.

For more information, you can Kohl3contact your Realtor or the listing agent, Jim Whitnell of Re/MAX.

Filed Under: Real Estate, Residential Purchase

What will mortgage interest rates be in October?

July 18, 2007 by Leave a Comment

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Who knows…it could be a trick or a treat!  This is a question asked earlier this week  from one of my past clients.   She has a friend who is buying a home that is new construction.   The builder has "encouraged" her friend to use their preferred lender by offering $5,000 towards closing costs.  The builder’s lender is refusing to quote rates, which unless they’re locking for 120 days or more…the rates they quote are useless.  Technically, if the LO has taken a loan application, they are required to provide a Good Faith Estimate within 3 days.

Lenders do offer 120 day locks.   There may be a non-refundable upfront fee and the rate is the higher (the longer the term of the lock, the higher the rate or cost for that rate will be).   If rates are lower in October than they are today for a 120 day lock, you’ve lost your upfront fee.   Even if you decide not to close on that property, that fee is gone.    Not to mention, 9 times out of 10, builders take longer than they anticipate to complete construction of the home.    At this point, they’re just pouring the foundation. The LO knows the buyer cannot or will not lock that rate yet.

I should add that this home buyer is well qualifed so being preapproved is not an issue.   I don’t advise getting preapproved from a Mortgage Professional and then ditching them over 0.125% in interest rate.   It’s very possible that the builder may require you to get preapproved from their lender even if you’re seeking financing elsewhere, in this case, I wouldn’t feel too badly about shopping them.   It’s not your fault you’re being forced to provide your financial information to a lender who’s shacked up with a builder.

My advice to my past client’s friend is to:

  • Request a Good Faith Estimate based on a 30 day quote just to see for the heck of it what the LO would disclose for fees associated with the rate.
  • Compare other lenders using the same scenario to get an idea of what the builder’s lender fees are compared to other lenders offering the same rate.
  • When the construction is closer to 60 days out, obtain updated GFEs.  At that point, you’re in a good position to lock in  your rate.   
  • It doesn’t hurt to ask!  The $5,000 credit may be legit or built into the rate.  It was probably all ready factored into the sales price of the home, however it’s too late to negotiate that once the purchase and sale agreement has been signed and some builders will not budge.   Should you want to work with your lender vs. the builder’s lender, there is no reason why your agent cannot submit an offer asking for the same credit.   
Filed Under: Interest Rates, Residential Purchase

Seven days of rain for Seattle

July 17, 2007 by 2 Comments

My garden says "THANK YOU, Mother Nature" for the next several days of summer showers.

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Filed Under: Seattle

Rescuing Homebuyers from Lending Tree

July 16, 2007 by 4 Comments

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I have a couple of clients who did not feel like “winners” having banks compete for them via Lending Tree.  Recently, I helped a family by closing their purchase in 5 days…the lender they obtained from Lending Tree did not perform after having their loan for over 30 days.   Here are a few nice words from my new clients:

[Read more…]

Filed Under: Interest Rates, Mortgage, Residential Purchase, Testimonials Tagged With: ,
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