Archives for December 2007

Holiday Schedule…are you closing a transaction this month?


If you’re closing on a home or refinance during the month of December, you may want  to keep in mind that many in the real estate and mortgage industry may be on vacation.   Offices will be lighter staffed than usual and this is a shorter month with the Christmas holiday.   I have not heard an official word from Mortgage Master yet…how ever, it would not surprise me if our office (and many others) closed early on Friday, December 21st and on Monday, December 24th assuming our closings are all taken care of.    Offices will be closed for Christmas.

I suggest making sure your Mortgage Professional has everything they need for your loan approval and be as flexible as possible with your signing appointments for the escrow company.   

This will help keep you on Santa’s good list!

Holiday Gift Idea: Books on Finance

Get Rich Slowly is a blog that I’ve recently become a fan of.   They have great info and although I may not agree 100% with some of their views on mortgages, I do respect the writers approach and how much they’re helping their readers.   I enjoy this blog so much I’m a subscriber.

They recently published a list of books and broke down the list by age group with ideas from young children to old folks.   If a book on managing finances is not your idea of a Christmas present…this list works for any time of the year!

Do You Qualify for the Bush-Paulson Five Year Fix?

Today both President Bush and Treasury Secretary Paulson announced a very controversial plan to help home owners "avoid foreclosures that are preventable".  Who qualifies to be saved?  According to President Bush:

"We should not bail out lenders, real estate speculators or those who made the reckless decision to buy a home they knew they could not afford…" 

To me, this sounds like if you did a stated income loan and your reported income to the IRS is out of line with what you submitted and signed your name to on the loan application, you may be excluded from this program.   The allowed debt-to-income ratios for many of the sub prime mortgage programs a few years back was 55%; I wonder if this plan will consider those with a 55% DTI "reckless"?   Note: a 55% debt to income ratio is taking the borrowers monthly gross income and allowing them to have a mortgage payment up to 55% of that gross income. 

Watch President Bush’s speech from this afternoon by clicking here.

Read President Bush’s call to Congress here.

In addition to FHA Secure and Hope Now, Bush and Paulson announced a 5 year freeze on mortgage interest rates for qualified subprime borrowers:

According to Bloomberg, you will need the following to qualify for the five year fix:

"The freeze may apply to mortgages issued between January 2005 and July 2007 that are scheduled to reset between January 2008 and July 2010, said a person familiar with the plan. Borrowers whose credit scores are below 660 out of a possible 850 and haven’t risen by 10 percent since the loan was sold will be given priority.

Those with scores above 660 will be more closely scrutinized to determine whether they are eligible or must continue making payments under existing terms…"

This follows Paulson’s plan which he unveiled earlier on Monday.   Paulson states there are four categories of subprime borrowers from Paulson’s press release on December 3, 2007:

  1. There are those who can afford their adjusted interest rate; these homeowners need no assistance.
  2. There are also a substantial number of homeowners who haven’t been making payments at the starter rate on their subprime loan and may not have the financial wherewithal to sustain home ownership; some of these homeowners will become renters again.
  3. Homeowners who might choose to refinance their mortgage – putting them in a sustainable mortgage while keeping investors whole.
  4. Those with steady incomes and relatively clean payment histories who could afford the lower introductory mortgage rate but cannot afford the higher adjusted rate.

Those borrowers in Group 4 are the ones currently being focused on by the Government.   So if you are able to afford your higher monthly payment (Group 1) you will not receive any benefit.  If you’ve never been able to afford your mortgage (Group 2); you will not receive any benefit.  If you chose to refinance now and take your home finances into your own hands (Group 3) you will not receive help from the Government.   Under Paulson’s Plan, Group 4 will receive help.

I recommend meeting with your Mortgage Professional if you have an adjustable rate mortgage that is scheduled to adjust in 24 months or soonerDon’t wait for someone to bail you out.  Even if you feel your credit is great and you have a handle on your mortgage; an Annual Mortgage Review is more important than ever.

Much still remains to be seen on how this plan will work out.

Mortgage Market Guide Weekly Updates

I received a nice email this morning from someone who appreciates the Mortgage Market Guide Newsletter.  I must admit, I don’t write the content for the MMG Weekly; it’s created by the professionals at Mortgage Market Guide.   I have noticed some local blogs where lenders are re-posting this information as their own; the MMG professionals deserve full credit for what they do on a weekly basis.

I subscribe to this as a tool for my clients, professional and consumer, to learn more about what’s going on in the mortgage industry and what their weekly predictions are on what rates may do and why they may move in a certain direction.   If you would like to be added to my email list so you receive this automatically, just drop me a line.   Or you can simply click on the green box on the left side of this blog to obtain the latest MMG Weekly report.

I also subscribe to Mortgage Market Guider’s bond watch which provides me with updates every hour via a text message on my phone.  In addition, I receive alerts if I should lock or float loans (I prefer locking).   Mortgage Market Guide is just one of the many tools that I invest in to help me stay on top of my profession.Dec_01_2007_vid00011_1_3

I do write my own monthly email newsletter as well (opt in).  I’m hoping to be able to pull it off this month…however with the holidays and trying to get my calendars and Christmas cards out to everyone; it may prove a bit challenging!   In fact today, we’re planning on putting up our tree (I can’t wait).   We bought it last night in the snow after a snow ball fight.

Snow in Seattle


We have our first dusting of snow on the first day of December.  This home is located on Beach Drive and is referred to as "The Painted Lady" and is available to purchase.  This historic landmark could be yours for just under a cool shy million (unless you want the large front lawn too).  MLS # 27105366.

Check out West Seattle Blog’s coverage of our first snow.  They have great photos from around the neighborhood.

Property tax on new constuction homes

Yesterday I was following up with a home buyer who I wrote about previously at Mortgage Porter.  They wanted a second opinion on their Good Faith Estimate which I provided.  It’s really hard to beat "builder credits" for working with their preferred lender when the purchase and sale agreement is all ready written.   If you have not presented the offer, you can always have the offer presented with the same credit and using YOUR lender…especially these days!

I was truly pleased to hear that the home buyer did indeed close and receive the rate they were expecting.   Here is their response:

"…The lender was nice enough to waive the processing fees ($750) after I complain about the high fees, however they did charge me the discount point fee.   I guess it never hurts to compare and complain.  I was able to utilize all the $8000 toward closing.   

The only thing that shock me was the property tax.  All the time I was quoted the land value property tax only. I chose to pay the land plus home value property tax at closing because I had to utilize all of the $8000 closing credit.  It added up to be 1.27% of my purchase price of $455,000.  How is property tax calculated?"

I always say to focus on the total costs shown on Section 800 and compare that with the rates of others…but you do need to be aware of other "tricks" that may happen.   Loan Officers should not under estimate property taxes.   Unless you provide your LO with a property address and the home has been assessed (not new construction), the going estimate in our neck of the woods is 1.25% of the sales price.   

For example, if your buying a newly constructed home with a sales price of $500,000; the monthly taxes should be $520.83.  (500,000 x 1.25%/12 months).

If your estimate is lower; you may want to question the lender and/or real estate agent.  It’s possible that if the seller may be receiving a Senior Citizen tax exemption greatly reducing the amount they pay; unless you qualify for their exemption, you’ll have the full bill.

With new construction, it’s very important to make sure enough taxes are collected to cover what will be due once the Tax Assessor decides how much your lovely new home is worth.   If there is a difference in what was collected, you will be paying if it’s short (aka omit taxes) and you may receive a refund from your lender when your escrow/reserve account is reviewed or King County will refund overpaid taxes when more than the full year was paid.

When I provide a Good Faith Estimate I request the property address so that I can research what the property taxes are.  Most local counties have this information available on-line for consumers, too.

I’ll do a post in the future addressing how property taxes on existing homes are calculated.

By the way, I always welcome your questions.  If you’re wondering about a certain mortgage or home purchase issue, chances are someone else is too.   Your question may help someone else in your shoes.