Archives for April 2011

Preapproval Letters Defined and Updated

This is an update from a post I wrote back in early 2007 about preapproval letters. So much has changed in the mortgage industry in the past few years that I thought it was worth refreshing this post with updated information.

The preapproval letter is a tool typically drafted by a loan originator to be used by a buyer’s real estate agent when presenting an offer on a property.   The letter may be in the form of a certificate or be an actual letter on the lender’s letterhead.   The preapproval letter is intended to assure the seller and the listing agent that the buyer has been buyer has been approved by the lender and therefore accepting an offer from this buyer, there should ideally not be any financing issues with the buyer.

When I prepare a preapproval letter, it usually contains the following (depending on the program):

  • Effective dates (the date the letter was written) and expiration date.
  • The borrower’s names (who is approved for financing).
  • The sales price and loan amounts they are approved for.  
  • Maximum mortgage payment (including any home owners association dues) the borrower is qualifed for.  NOTE: this is very important when we're in an environment where rates may rise quickly.
  • The type of financing is confirmed (ex. Conventional, FHA, VA, USDA, etc.)
  • Credit has been reviewed.
  • Employment and income has been confirmed.
  • Down payment and funds for closing (closing costs, prepaids and reserves) are verified.
  • Any closing cost that are being requested to be paid for from the seller.
  • Any item the preapproval is subject to (such as satisfactory appraisal, title, complete purchase and sale agreement, etc.).
  • Mortgage originators name and contact information.

If these items have not been actually verified with proper documentation, then a buyer has been prequalified—not preapproved.  BIG DIFFERENCE.  Being prequalified essentially means that a verbal interview has been conducted without providing all of the necessary supporting documents (pay stubs, W2s, bank statements—again, depending on the type documentation required for the specific loan “full doc” to “no doc”).  A Good Faith Estimate does not constitute a preapproval.

The preapproval letter does not contain private information such as a buyer’s credit score or their additional assets.   It is a sales tool for the buyer’s agent and if there are multiple offers presented on a home, having a strong preapproval letter is an advantage.   This is one reason why it is crucial for buyers to become preapproved before they begin shopping for their next home.   Many listings agents will not even consider an offer unless the buyer has been preapproved.    

The preapproval letter is generally effective a specific amount of days, depending on when supporting documentation is set to expire (such as the credit report).  Updating a preapproval letter is simply re-running the credit and possibly obtaining most recent income and asset documentation (paystubs and bank statements).    On occasion, the buyer’s agent may request a revised preapproval letter if they are presenting an offer on a home that is priced for less than what the buyer is approved for and if they are asking for closing costs.  It's not uncommon for me to issue several preapproval letters for a home buyer based on different homes or offers they are presenting.

Real estate agents may also consider who the preapproval letter is from, and they may contact the lender to confirm the buyer is indeed prepproved and not just prequalified.   Many agents will tell you that the preapproval letter is only worth the paper it’s printed on.   This is also why it’s very important to be selective with lender you work with…it could possibly impact whether or not your offer is accepted on your next home.

I highly recommend starting the process early (6 to 12 months before you're planning on buying) just in case there are unknown credit or down payment issues.  I can also prepare preapproval letters on weekends as long as I have been provided all of your supporting documentation.   If you're considering purchasing a home located anywhere in Washington state and need a preapproval letter, I'm happy to help you!   

How to Buy an Investment Property with a 10 Percent Down Payment with no PMI: Fannie Mae Homepath Mortgage

HomepathEDITORS 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.

Seattle area investors are taking advantage of current lower home prices and are buying rental properties.  One of the issues with investment property is that it often requires a larger down payment and more stringent underwriting guidelines.  However, if you buy a qualified property that is owned by Fannie Mae, the Homepath guidelines will allow as little as 10% down for an investment property with NO private mortgage insurance and NO appraisal.

[Read more…]

This Week Could be a Doozie for Mortgage Interest Rates

In the past, I've included the scheduled events that may impact mortgage interest rates in my rate weekly rate post.  However, this week is so packed data that I thought it was worthy of a post all its own.  Check this out (items that are bold tend to be the may be the most influential to rates):

Monday, April 25:  New Home Sales

Tuesday, April 26:  Consumer Confidence

Wednesday, April 27:  FOMC Meeting and Durable Goods Orders

Thursday, April 28:  Gross Domestic Product, Initial Jobless Claims, GDP Chain Deflator and Pending Home Sales.

Friday, April 29:  Personal Consumption Expenditures and Core PCE, Employment Cost Index, Chicago PMI and Consumer Sentiment Index (UoM).

Wednesday, we'll learn if the Fed's interest rate decision and possibly gain clues as to their plans with QE2.  Ben Bernanke is going to be having a news conference following the FOMC meeting which many will be tuned into hoping for clarity on his views of the direction of our economy.  You can see the entire week offers plenty of data to be digested.  

Remember, mortgage rates are based on mortgage backed securities (bonds) and are not set by the Fed.  Mortgage rates may are impacted by how MBS are being traded on the bond markets.  When the stock market is rallying or there are signs of inflation, mortgage rates tend to raise higher.  When the stocks are tanking, investors will often seek the safety of bonds which will cause rates to move lower.

Whether or not you should lock or float (not lock) your interest rate depends on your personal risk tolerance.  My general stance is that if you like the rate that is currently available – you should consider locking.  Decide which scenario is worse for you: losing today's rate by not locking or locking todays rate with a rate drop tomorrow.  Please discuss this with your local mortgage professional.  I am a NMLS Licensed Mortgage Originator dedicated solely to Washington State.    If you are interested in a mortgage for a home located anywhere in Washington State, I am happy to help you.

NOTE:  I plan on posting mortgage interest rates today.  Stay tuned!

Happy Earth Day

When I'm not helping people with financing to refinance or buy their next home or investment property, I love to spend time in my garden.

Check out this hummingbird who decided to take a break in one of the cherry trees in the front yard of our Seattle home.

How are you celebrating Earth Day?

Survey Says: How Consumers Select their Mortgage Originator

A few weeks ago, I posted a survey with three questions to learn consumers opinion about the Fed's rule on loan originator compensation and how they select their loan originator.  Here are the results.

Please rate the following based on how you will select your next mortgage professional:

  • Years of experience as a mortgage originator (72.7%)
  • Referral from someone you trust (63.6%)
  • I will return to the LO who helped me with my last mortgage (62.8%)
  • Whoever quotes the lowest rate (45.5%)
  • Type of institution (bank, correspondent lender, broker or credit union). (38.6%)

When I'm helping someone with a mortgage for a home located in Washington state, I find that a majority of my new clients are readers of my blog.  I'm also fortunate that many of my clients are referred to me from real estate agents and financial planners.  Home owners I have helped in the past also tend to refer their friends and family and return to me for their next.  I do not advertise (with the exception of my tiny ad on West Seattle Blog), I do not take "up calls" and I do not buy leads…never will.

Thank you for reading my blog and for remembering me when you or someone you know needs a mortgage for a home in Washington.  I feel so fortunate to have my business model where consumers seek my professional advice and assistance with their home loans. 

Walla Walla Weekend

Col Solare

Earlier this month we decided to travel to Walla Walla for a "wine weekend". The scenic 4-5 hour drive from Seattle takes you over the Snoquamie Pass via I-90.  I relied on an app from the WSDOT on my Droid to provide us up to the minute pass conditions and information on traffic.

We like to stop in Ellensburg for lunch at the Yellow Church Cafe; I recommend their burgers and the tuna melt.   Ellensburg is a wonderful old town and my husband went to Central so it's a fun place to stretch our legs before heading on towards Yakima (another great area of wine country in Washington) before reaching our final destination.

Some of my favorite places we visited this trip are Rotie Cellars, Seven Hills, El Corazon, Basel Cellars and Zebra Cellars.

DSC00394 We stayed at the Holiday Inn Express which is actually just on the outskirts of Walla Walla.  If you want to be more in town so that you can walk to different wineries and tasting rooms, you may want to check out a local B&B, the Marcus Whitman Hotel or another location.  If you have a favorite spot to stay at in Walla Walla or wineries to visit, please comment and let me know!

Next time we're planning on visiting Red Mountain.  Col Solare is pictured above and they require an advanced appointment tastings.

Check out more of my photos of our road trip to Walla Walla.

Fannie Mae Homepath Mortgage Incentives are BACK!

NOTE:  This program has been extended through October 31, 2011.

Fannie Mae is trying to sweeten the pot for buyers to considering using a Fannie Mae Homepath Mortgage for purchasing a foreclosed home that is now owned by Fannie Mae by offering 3.5% in closing costs on eligible transactions that close by June 30, 2011.

Here are some details for qualifying for the Fannie's Homepath Mortgage special (from the Homepath website):

  • Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.
  • The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.
  • The sale must close on or before June 30, 2011. No exceptions will be made to this deadline.
  • Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.
  • Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
  • If a buyer's total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.

Don't forget, the Fannie Mae Homepath Mortgage does not require an appraisal and there is no private mortgage insurance for credit scores over 660.   Fannie Mae will lend up to the high balance conforming loan limit, which is currently $567,500 in the greater Seattle area.   For more information, click here.

NOTE:  If you're considering a Fannie Mae HomePath Mortgage…I recommend checking out FHA rates which are currently lower, offers down payments as low as 3.5% and the mortgages are assumable.  It never hurts to compare your options!

If you have questions or would like a rate quote for a home located anywhere in Washington, please contact me!

The Importance of Having a Will

My father passed away last December after a battle with skin cancer and COPD.  He was not a financially wealthy man.  He was rich with love from his daughters, grandchildren, family and friends.  I'm not sure if he was being optimistic or was in denial about his health, he never created a will despite his failing health.

A few weeks after we buried Dad, I went to his bank to see what I was suppose to do.  At the very least, I wanted them to know that he was no longer living and to close the account to prevent any charges or activity that should no longer be happening.  The person who "helped" me wouldn't even speak to me without a will.  In fact, he hinted that if I opened an account, it might be easier to assist me.  I was so upset and emotional that I stormed out.  I was looking for guidance and received nothing…silly me.

If you don't create a will, then the State of Washington has specific laws as to what will happen with any real or personl property and who will be the beneficiary of the estate.  This is referred to as "intestate".   Dad's "estate" is probably is not enough to hire an attorney over.  If there's anything to help reimburse the cost of his burial, we'll be pleasantly surprised.   

By the way, this site has been the most helpful that I've found so far with trying to figure out what to do: This site has been probably the most helpful that I've found so far regarding Dad's estate:

If you're drafting or updating your will, you may want to consider an estate planner or attorney who specializes in this matter to help you determine if you need a trust and to avoid possible death taxes. 

Please take time to create a will for you and your loved ones.  Make sure your wishes are honored and let someone know where your will is.  If you have a will, when was the last time you updated it?   Please don't leave this matter up to Washington State laws.  If my Dad would have had a will, I believe this issue would have been easily resolved by now.