Archives for October 2010

Happy Halloween

Pumpkinme
Just finished voting… please take some extra time to read everything that's on the ballot.  The only thing more haunting than people not voting are those voting without reading and learning for themselves what initiatives and candidates are about.   Please do not rely on the terrible commercials we see and hear.  

If you don't want to read the voters pamplet, I recommend checking out  Robert Mak's video voter's guide on King 5.  I found it to be very easy to understand and unbiased.

Election Day is this Tuesday, November 2, 2010. 

VOTE!

Washington State LO’s – You Don’t Want to Miss This Event!

VIBEThe Washington Association of Mortgage Professionals is holding their annual awards luncheon  which will be featuring speakers and presentations.   The person I am most looking forward to hearing is Laura Gipe.   Laura is a Compliance Officer with HUD and has been very involved with the Good Faith Estimate.  

She has been a great resource for me when I've had questions about HUD's 2010 GFE and I can't wait to learn what she has to say about the future of the GFE.

ANY mortgage originator who is planning on originating residential mortgage loans beyond this year should attend.  

This takes place November 5, 2010 at the SeaTac Holiday Inn.  You can register by clicking here.   Register by November 3, 2010 for discounted rates!

Download MortgageVibe2010Flyer

I hope to see you there!

Another Reason You Should Not Postpone Refinancing Your Seattle Home: Your Neighbor’s Foreclosure

The media is reporting that the Seattle-Tacoma-Bellevue area saw a huge increase in foreclosures from information provided by RealtyTrac.  According to the media, the Seattle area has had an increase of 71% in foreclosures; one of the largest increases in the nation.  I agree with CNBC's Diana Olick's take on the data:

"During the housing boom, Seattle was actually the last to see the big boom in prices and then on the other side, the last to see the big drop in prices so it could be that Seattle is kind of catching up with the rest of the country now seeing those foreclosures because prices did get so high there and drop so precipitously."

 

Foreclosures and short sales do impact property values and the current "appraised value" of your home as an appraiser may need to use a nearby short sale as a comparable property for your home.  If you're considering refinancing, and your refinance requires an appraisal, this may impact your loan-to-value and home qualifying for the new loan if your home appraises for less than originally expected.  Some refi's do not require an appraisal, such as an FHA Streamline (where you are refinancing an existing FHA mortgage to a new FHA mortgage) and some Fannie Mae Home Affordable refi's are qualified without an appraisal…but a majority of mortgages do require an appraisal.  (I wish that all appraisals could be waived if the home owners qualifed based on employment, income and credit…I truly beleive this would help stimulate the economy…but it's not the case).

If you are delaying a refinance, you may be risking more than losing today's low interest rate, you may be risking your home's appraised value. 

Related post:

It's Not You,It's Your Neighbors

The Wild Card of Refinancing

Declining Home Values: Good for Buyers – Bad for Refi's

When an Appraisal Comes in Low for a Refi

The Cash-In Refinance

Pricing a Home Affordable Refinance

Buying a Home with Owner Occupied Financing After Refinancing Your Home as Owner Occupied

I’m seeing a trend where home owners are refinancing their current home as “owner occupied” and then weeks after closing, try buying another home as “owner occupied”.  You cannot have two owner occupied homes.   It’s really that simple. 

I’ve had a couple of surprised people contact me who thought they could buy a home just following a refinance only to learn by their mortgage originator that they have to finance the new home as an investment property.   Financing an investment property not only offers a slightly higher interest rate than a mortgage for a primary residence, it also has tougher guidelines with higher down payment requirements and greater reserves (savings).  

If you are considering refinancing your primary residence and possibly buying another home, you should discuss this with your mortgage originator as soon as possible.  You will be signing a deed of trust which has language that you intend to occupy that home for 12 months.  Some folks might feel that the “intending to occupy” means that they can refinance as owner occupied and a couple months later buy “owner occupied” and odds are, they will be caught.  It may be purely unintended for this to happen, but be prepared for the possibility the new purchase to be treated as an investment property, even if you’re going to live there. 

If you’re considering taking advantage of the lower home prices and lower rates, you may want to delay your refinance of your current “primary residence” or talk to your mortgage originator about refinancing your current home as an investment property.  Your next purchase might qualify as a second home, however the property typically needs to be about 50 miles away from your primary residence (the one you just refinanced) and it is the underwriter’s call on whether or not the second home “makes sense”…this can be a real grey area.  

Life happens and we know plans change. Be upfront with your mortgage professional if you’re thinking about buying a home.  You may want to ask them to verify with your personal scenario with an underwriter.  Finding yourself in the middle of a transaction to buy your next home and having it declined as owner occupied can be an expensive experience.

Related post:

Is it a Primary Residence, Second Home or Investment Property

Can I Convert My Existing Home to an Investment Property to Buy My Next Home?

You Don’t Have to Lock Your Rate to Start Your Refi

If you are interested in refinancing, or even buying a home, you don't need lock in your rate at application.  A majority of the Seattle area clients I work with, delay starting the refinance process until rates reach the point where they are wanting to lock.   A mortgage rate lock commits a specific interest rate and program for a certain period of time.

If your are serious about refinancing and rates are within range of your goal but you're not ready to lock, I recommend starting your loan application prior to the lock.  This gets one step out of the way and allows your mortgage originator to review your information and to make sure that the rate you're being quoted is accurate.  We will provide you with your preliminary loan documentation and work on your credit approval.

One benefit of delaying your lock is that a shorter lock period may be required for processing your transaction.  It may also help avoid an extension, should the rate lock expire.   The risk, however, is that you miss out on today's very low rates.  Borrowers should consider which risk they can tolerate more: the risk of locking in too early and having rates improve or the risk of locking in too late and having rates rise.  Personally, I'm not a "floater"…if I like the rate, I lock it….but it is the borrower's choice.

If your home is located in Washington state, where I'm licensed to originate, I'm happy to help you with this.  There is no cost to you until the appraisal is ordered and the appraisal can be postponed until you decide to lock.  And if you complete your application with me on line (click "apply here") I'm currently offering a $300 credit towards your closing costs when your mortgage funds with Mortgage Master Service Corporation.

So what are you waiting for?

How Much Do I Need for Down Payment to Buy a Home?

When you buy a home, most loans require a down payment.  A “down payment” is the difference between the loan amount (what is being financed) and the sales price.   Down payment percentages are based on the sales price.  Be prepared for every dollar that is used for your down payment to be documented or sourced (including large deposits reflected on your statements).  In addition to the down payment, there may be closing costs and reserves.  

Closing costs can be paid by lender credit (via an increase in interest rate) and sometimes the seller can contribute to closing costs.  If the seller is paying for closing costs, there may be restrictions based on the program type and the amount of down payment you are making.  If the seller is paying your closing costs, it needs to be negotiated in the purchase and sales agreement.   Reserves are the savings the lender wants you to have in your account after closing typically measured by months of your proposed mortgage payments.   It’s safe to plan on at least two months of proposed mortgage payments to be in your bank after closing for “reserves” whether your lender or loan program requries it or not. 

Some home buyers select their mortgage based on down payment requirements.  Here are some different programs beginning zero down payment options for homes that are owner occupied/primary residence.

VA Loans.  If you served our country, thank you.  You may qualify for a VA loan which allows zero down payment and the seller is permitted to pay 100% of your closing costs.   Zero down payment is available up to the VA loan limit, which in King, Pierce and Snohomish county is currently $481,250.   If your loan amount is above the current VA loan limit, your required down payment is 25% of difference between the loan limit and the sales price.   There is no mortgage insurance, however VA loans do have a one time funding fee.

USDA loans.  Homebuyers who are willing to live in a rural area and who meet income guidelines can also buy with zero down payment.  Like VA loans, there is no mortgage insurance and there is a one time funding fee.  Again, USDA loans have income and geographic restrictions.

FHA.  Currently FHA will allow a down payment as low as 3.5%.  Current FHA loan limits in the greater Seattle area is $567,500.  FHA loans do have mortgage insurance (upfront and monthly).  Sellers can currently contribute up to 6% of closing costs and prepaids, however this (and possibly the down payment) guideline are expected to change.  A family member can gift the down payment requirement of 3.5% which would effective make an FHA loan “zero down” for the home buyer.

Conventional.  Conventional programs are Fannie Mae and Freddie Mac programs.  If you’re putting down 20% or more, you avoid private mortgage insurance.   Any purchase with less than 20% down payment will most likely have private mortgage insurance.  Seller contributions towards closing costs and gifts from parents vary depending on your amount of down payment.

Private mortgage insurance rates and guidelines vary based on the loan to value (the amount of your down payment), credit scores and programs.  The lower your down payment, the more expensive the cost and the tougher the guidelines are because the loan is more risk for the private mortgage insurance company.

Fannie Mae Homepath.  Fannie Mae’s Homepath allows home buyers to purchase a foreclosed home owned by Fannie Mae with as little as 3% down payment, with no private mortgage insurance and no appraisal.  Fannie Mae often offers additional “special” incentive programs, including contributing towards closing cost.  This program is limited to specific homes that Fannie Mae currently owns.

Non-conforming/Jumbo loans. In the Seattle/King County area, any loan that is over $567,500 is a “jumbo loan”.   The loan limit varies depending on what county the home is located in.  For homes that are not in a designted ”high cost” area, a non-conforming loan amount is any loan $417,001 or higher. 

Plan on at least 20% down payment and having roughly six months reserves after closing depending on how many properties you currently own.  

I do have other resources that will allow a lower down payment of 10% down with a loan limit of $600,000 and “self insurance” (slightly higher rate in lieu of private mortgage insurance). 

What happened to piggy-back mortgages?   Every once in a while I’m contacted by a borrower who is interested in an 80-10-10 which would allow a borrower to put 10% down payment, using a second mortgage to make up for the difference between the first (primary) mortgage and the down payment.   Currently, most lenders are offering a maximum loan to value of 75 or 80% 85% which rules out the 80/10/10 scenario.  UPDATE August 25, 2011: Some of the lenders we work with are offering second mortgages up to 85% loan to value to well qualifed borrowers.

If you are considering buying a home located in Washington state, I’m happy to review your down payment options with you and help you develop your home purchasing plan.

Related post:

How to Buy a Home with $10,000

How Much Home Can I Afford?

Seattle Skyline Over the Years

This video is actually very clever marketing for the proposed new building Fifth and Columbia in downtown Seattle.

Fannie Mae’s HomePath Program

EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you.

Fannie Mae’s HomePath program is available to purchase qualified foreclosed homes (owned by Fannie Mae) with expanded conventional guidelines, competitive mortgage rates and often times, with special incentives.

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