Archives for August 2008

JP and Gertrude’s Big Day


Today in Fremont amongst hundreds and hundreds of Patches Pals and politicians…JP  and Gertrude’s statue was unveiled to the delight of many.   Pat Cashman did a great job as the narator for this event.

The statue has all ready raised $78,000 for Childrens Hospital and will continue to do so when Pals make donations into the ICU2TV portion of the statue. 

There were so many fans there (most with red noses) that I was not able to get a great shot of the new statue…I plan on visiting again soon.

You can check out more photos from today by clicking here.  (Also included in this photo set are photos taken from when the original statue design was unveiled).

Gifts from the Bank of Mom and Dad – Part 1: FHA

Home buyers using FHA to finance the purchase of their home can get help from family members towards the down payment and closing costs in the form of a gift.  NOTE:  With the passage of HR 3221, parents will actually be able to contribute towards the down payment and closing costs as a loan instead of a gift (more info to follow–this is not in effect until October 1, 2008).

Both FHA and conventional mortgages allow for gift funds; they have different requirements.  Part 2 of this post will address gifts when conventional financing is involved. 

FHA Gift Requirements…create a paper trail.

HUD wants to make absolutely sure that gift funds are NOT from the seller, real estate agents, builder or anyone who has an interest in the transaction.   Although to the gift giver (donor) this seems invasive, the donor must prove that the funds they are giving are their own and they must sign a Gift Letter that includes the gift amount and that no repayment is required. 

If the gift funds are already in the home buyer’s account:

A copy of the canceled check (front and back) from the donor will be required along with a copy of the home buyer’s deposit slip or bank statement that shows the deposit.   If the donor is not able to provide a copy of the canceled check, they will need to provide other evidence that the funds were theirs (such as the bank statement showing the funds being withdrawn from their account).

If the funds are to be provided at closing to the escrow company:

When the gift funds are from a certified check, cashiers check or money order; the donor must provide a copy of the withdrawal document or canceled check, copy of the check and a copy of their bank statement showing the with drawl of funds.

If the donor borrowed the gift funds, they must provide evidence of where the funds came from and that they did not come from a party who has an interest in the transaction (seller, real estate agent, builder, etc.).

“Cash on hand” is never an acceptable form of gift funds.

Documentation and creating a paper trail is the key with gift funds.   Gift funds can go towards both the down payment and closing costs for an FHA buyer.  Seller contributions are limited to actual closing costs and prepaids (and cannot go towards down payment) after the buyer has met the minimum required investment (3% until December 31, 2008; then the minimum required investment is 3.5% for the buyer).

Gift funds are not limited by family members; employers and charitable organizations (as long as they are not funded by the seller after October 1, 2008) are also permitted to contribute gift funds with FHA financing.  Family members may include brothers, sisters, aunts, uncles–even close family friends as long as the relationship can be documented.

Gift donors may want to check with their Tax Advisor to make sure they avoid paying gift tax (currently $12,000 per parent/donor per child/family member).  For example, two parents (Mom and Dad) could gift $12,000 each for a total of $24,000 for to a child per year.  If the Bank of Mom and Dad want to gift to their daughter or son in law as well, the gift amount could go up to $48,000 without incurring gift tax.  (Again, always check with your CPA or tax advisor).   

If you’re considering FHA financing, check HUD’s site to make sure your lender is FHA approved–many are not.  Mortgage Master is a HUD approved Direct Endorsed FHA lender with FHA underwriters at our location.  Be sure to ask your Loan Originator how long they have been originating FHA loans.  I have been helping home owners with FHA financing for over eight years.   

Do you have questions about financing your home located in Washington State?  Please contact me.

JP Patches & Gertrude Statue Unveiled in Fremont Tomorrow


You know I’m a Patches Pal–I grew up glued to the TV on weekday mornings watching  JP hoping he would see me through his ICU2-TV.   I wasn’t alone–if you are a Puget Sound native around my age, odds are, you’re a Patches Pal too!

Patches Pals have been waiting for this day and many have purchased Patches Pal Pavers to support this great cause (excess proceeds benefits Childrens Hospital).   I even added JP’s mug to the right on Mortgage Porter to make it easy for my subscribers/readers who are fellow Patches Pals to participate.

Well the big day is almost here…"the most anticipated event in human history" according to JP’s website.   You too can witness the great unveiling of the statue:

This Sunday, August 17, 2008 beginning at 1:00 p.m at the Solstice Plaza (N. 34th Street just east of the Fremont  Bridge).

Come celebrate the men (JP and Gertrude) who have touched so many local lives!

Fannie Mae & Freddie Mac increasing Adverse Market Fees

Effective October 1, 2008, Fannie Mae is adjusting the cost of mortgages from 0.25% to 0.50%.  Freddie Mac will follow on November 7, 2008 with an add of 0.50%.  Consumers will most likely not see this from their end–it will all ready be factored into the pricing of their rate. 

Some lenders will begin pricing in the fees before Fannie and Freddie (conventional financing) as the dates are for when loan files are delivered to them–not originated or locked.  A lender does not want to get caught with a rate where they’ll owe Fannie or Freddie 0.5% more in fees per file come October…in fact, I’ve noticed that a few lenders have all ready started incorporating these fees into rates this week.

A half point in fee (or 50 bps) typically equals about 0.125-0.25% to rate depending on what pricing is when the mortgage interest rate is locked.  The amount of the fee (referred to as LLPA or Adverse Market Fee) varies depending on credit score, loan to value and program.   Fannie Mae has added loan to value brackets from the previous guide over 70%.   The new LLPA (loan level price adjustment) matrix is more complicated than the earlier one as well.

This is one reason to work with a Mortgage Professional who has the ability to shop various banks and lenders during a transitional period such as this.  For example, assuming a lowest mid-credit score of 679 (two borrowers) at an 80% loan to value for a purchase, the difference between lenders who are all ready factoring the "adverse market fee" is 0.75% to fee.  Based on a loan amount of $400,000, this would cost an extra $3,000 for the same rate or about 0.25% more in rate!

The closer we near October, the more lenders will start pricing in Fannie’s adverse market fees.

FHA Minimum Down Payment Increasing January 1, 2009

With the passage of HR 3221, the minimum required investment of a home buyer utilizing a FHA insured mortgage is increasing from roughly 3% to 3.5% effective January 1, 2009.  You may think this sounds like small change, but with larger loan amounts, this adds up.

For example, if a home buyer is utilizing a FHA Jumbo and they are buying a home priced at $500,000.   Their current minimum required down payment of 3% is $15,000.  Effective January 1, 2009, the minimum required down payment of 3.5% is $17,500; a difference of $2,500 for the amount required to invest into the transaction.   With a home priced at $300,000; the current required investment from the buyer would be $9,000.  As of January 1, 2009, the new amount required will be $10,500.

What does this mean to you?

If you are planning to buy a home utilizing a FHA insured mortgage, be aware of the changes to the minimum down payment requirements.   After December 31, 2008, you'll be required to come up with additional funds towards your down payment which may be a gift or loan from family members.

If you are wanting to take advantage of the lower down payment requirement, meet with a Mortgage Professional who is qualified to provide FHA loans (not all loan originators are, you can check HUD's site to verify).

If you would like me to provide la rate quote for a FHA mortgage on a home located anywhere in Washington, please click here.

Editors Note: this post wass been modified to correct the effective date.

Conforming/FHA Jumbo Limit to Decrease January 1, 2009

November 7, 2008 Update: FHFA has announced the new conforming jumbo loan limits for 2009 which are based on a lower median home price than used here (which was 2008’s limits).  Based on these figures, a single family unit will be $506,000 for King, Pierce and Snohomish Counties.  Read more here.

Recent legislation, HR 3221 included what the new conforming loan limits will be.  Our conforming-jumbo limits will be rolled back slightly to the following effective for all mortgage loans not closed December 31, 2008.   Here’s what the new limits will be effective January 1, 2009 (based on HUD’s current median home prices at the time of this post):

King, Pierce and Snohomish Counties:

Single Family:  $506,000 $522,100 ($567,500 until 12/31/2008)

Two Family:  $668,350 ($726,500 until 12/31/2008)

Three Family: $807,850 ($878,150 until 12/31/2008)

Four Family: $1,004,000 ($1,091,350 until 12/31/2008)

Kitsap County:

Single Family:  $437,000 ($475,000 until 12/31/2008)

Two Family:  $559,450 ($608,100 until 12/31/2008)

Three Family:  $676,250 ($735,050 until 12/31/2008)

Four Family:  $840,350 ($913,450 until 12/31/2008)

San Juan County:

Single Family:  $546,250 ($593,750 until 12/31/2008)

Two Family:  $699,250 ($760,100 until 12/31/2008)

Three Family:  $845,250 ($918,800 until 12/31/2008)

Four Family: $1,050,500 ($1,141,850 until 12/31/2008)

Clark and Skamania Counties:

Single Family: $417,000 ($418,750 until 12/31/2008)

Two Family:  $533,850 ($536,050 until 12/31/2008)

Three Family:  $645,300 ($648,000 until 12/31/2008)

Four Family:  $801,950 ($805,300 until 12/31/2008)

Jefferson County:

Single Family:  $417,000 ($437,500 until 12/31/2008)

Two Family:  $533,850 ($560,050 until 12/31/2008)

Three Family:  $645,300 ($677,000 until 12/31/2008)

Four Family:  $801,950 ($841,350 until 12/31/2008)

Watch for my follow up post on what this means to you.

Read my related articles on HR 3221:

First Time Home Buyers Tax Credit

Down Payment Assistance Programs Days are Numbered

Down Payment Assistance Programs Days are Numbered

With the passing of HR 3221, Down Payment Assistance Programs will no longer be allowed with FHA mortgages as of October 1, 2008.    DPA’s such as Nehemiah, have been popular for helping home buyers come up with their down payment.  FHA allows Sellers to pay for closing costs and prepaids as long as the buyer has met their minimum required investment (which has also changed with the passing of HR 3221–another post will follow on this subject).   With DPAs, the seller contributes funds to the DPA (like Nehemiah) which is a "charity" (they collect a small fee from the seller which is used for charitable causes).   The DPA then contributes the funds towards the down payment for the buyer.

Section 2113 of HR 3221 states that down payments for FHA insured mortgages may not come from "the seller or any other person or entity that financially benefits from the transaction" or "any third party or entity that is reimbursed directly or indirectly".  This applies for new loan applications on or after October 1, 2008.

Family members can still contribute towards the down payment on FHA insured mortgages.  In fact, Section 2113 of HR 3221 allows family members to loan up to "100% of the appraised value of the property plus any initial service charges, appraisal, inspection and other fees in connection with the mortgage".   The borrower must qualify for both mortgage payments (the first mortgage-FHA insured at 96.5% of the appraised value and the second mortgage from the Bank of Mom and Dad for the remainder).   This may make family members more comfortable with helping out with down payments as it will not be treated as a gift and the loan is documented, terms would be clear and recorded as well as secured against the property as collateral.  (Hopefully the Bank of Mom and Dad never have to foreclose).

What does this mean to you?

If you’re considering buying a home with minimum down payment, your family can gift or finance the 3.5% required investment of the buyer for FHA insured financing.  However, if you’re family not in the position to do so or if you don’t want to ask the Bank of Mom and Dad, then you have limited time to take advantage of the Down Payment Assistance Programs.

If you’re hoping to use a down payment assistance program to purchase your next home, you have just over a month to do so.  Meet as soon as possible with a qualified Mortgage Professional who can help you become preapproved with an FHA insured mortgage (NOTE:  not all lenders are approved to do FHA loans).  You must be credit approved prior to October 1, 2008 (and the closer we approach that date, the busier FHA approved lenders will be trying to beat the deadline).

Of course, DPAs are going down kicking and screaming to stay alive.  At this point, the countdown to the demise of DPAs is clicking away.

Update: 9:30 am August 11, 2008.   I’ve just received notice from one of the banks that we work with are no longer allowing DPAs.   This serves as a good reminder that lenders may have their guidelines that overlay government requirements.

Related posts on HR 3221:

First Time Home Buyer Tax Credit

A Sunday Drive to Healdsburg, Sonoma County

As you may know, I was in San Francisco last month for the Inman Connect real P7250157estate  conference.  I decided to add a few days to my trip and make the most of my air fair expenses by visiting Sonoma…specifically Healdsburg.  I know this isn’t quite a "neighborhood tour" like I’ve been promoting at Mortgage Porter…I’m hoping you’ll enjoy this post all the same.

It was a lucky fluke that we wound up based in Healdsburg, which is just north of Sonoma.  Sonoma is a nice town but if you want to really see wineries and enjoy a small town atmosphere, head north and you’ll be in P7250162 the heart of the Russian River wine regionDave Savage of the Mortgage Coach provided us with some excellent recommendations which I’ll share with you too.  (I may abbreviate: DSR = a "Dave Savage Recommendation").

An inexpensive (compared to other places in Sonoma county) place to stay is the Best Western Dry Creek Inn which is located right on Dry Creek Road and Highway 101.  Breakfast comes with the room but I suggest heading out to the Flying Goat Coffee for your morning jolt of caffeine.  Dave says they serve the world’s best cappuccino.

We also enjoyed an incredible breakfast at Costeaux French Bakery which has been a part of this town since 1923.   You need a nice breakfast if you’re going to start your day early with wine tasting!P7250113

In the town of Healdsburg, we found some wonderful wineries and tasting rooms.  Two of my favorites are:

  • Williamson Wines.  Bill Williamson pairs his wine tastings with food.  It’s an amazing experience.  Imagine having a piece of cheese with a bit of pickle on top paired with a sip of Chardonnay.
  • You also must visit Seghesio Family Vineyards on of the oldest in Healdsburg…they have great wine too.  (Thanks DSR).

Dave Savage had spot on recommendations for places to dine in Healdsburg.   For dinner, he recommends (and I agree):

Ravenous.  Located next to the town theater on North Street.  This is a cozy restaurant that you may need reservations for.  We had the ribs and flank steak. (DSR)

Bistro Ralph.  We shared a steak served on a pile of the tiniest french fries topped with a dollop of horseradish.  Reservations are a must. (DSR)

P7260186Driving north on Dry Creek Road, you can catch a concert on Friday evenings at Mazzocco Wines.   Pack a picnic and they’ll happily uncork one of their nice wines for you to enjoy on the lawn.   Passalacqua Winery and Unti are also a "must stops".   Many people recommended Bella Vineyards and Wine Cave, which is beautiful; however, when we were there, it’s was also packed with tour buses…Preston Vineyards was a welcome break from the crowds where no groups over 8 are allowed.   At the end of Dry Creek Road, you’ll find Lake Sonoma and Sbragia Family Vineyards which not only boasts amazing views, they also have fantastic wine.

Healdsburg has amazing wines and I’m just touching the surface.  Watch for another post for the rest of our excursion to Sonoma County soon.