Archives for January 2013

Buying a 2-4 Unit Home using an FHA Mortgage

mortgageporter-seattle-duplexEDITORS NOTE: This post was written in 2013. FHA loan limits have changed as well as the interest rates posted below. Please see the bottom of this web page for current FHA loan limits. If I can provide you with a current rate quote for your home in Washington, please click here.

If you are considering buying a duplex, triplex or fourplex and you’re going to live in one of the units, FHA is a possible mortgage option.

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Heads up! HUD issues Press Release with upcoming changes to FHA Mortgages

Today HUD issued a press release confirming pending changes to help bolster FHA’s capital reserves.

“These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante.  “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.”

Some of the changes to take place with HUD have already been announced. Here are a few points from today’s press release

  • FHA annual mortgage insurance will remain on the mortgage for the life of the loan. This is the mortgage insurance that is paid monthly. Once this goes into effect, home owners will need to either refinance to a non-FHA loan or pay it off to no longer have mortgage insurance. 
  • Mortgage insurance is set to increase. The annual mortgage insurance (remember, this is the one that is paid monthly) is set to increase by 0.10 basis points. FHA Jumbos will see an increase in the mortgage insurance by 0.05%.
  • FHA Jumbo’s will have a larger down payment requirement. Currently a home buyer can do as little as 3.5% down on all FHA insured mortgages. Once this goes into effect, the minimum down payment for an FHA jumbo will be 5%. In the greater Seattle area, loan amounts over $417,000 and up to $567,500 are currently considered “FHA Jumbos”.
  • Manual underwrites for credit scores below 620 with debt to income ratios over 43%. Currently, I believe the lowest credit score our company can do for an FHA insured mortgage is 640.

We are waiting for HUD to issue Mortgagee Letters before this goes into effect. 

Stay tuned!

HARP 3.0 and #MyRefi Update

An article published today by Bloomberg Businessweek gives some hope of HARP 3.0 and #MyRefi (aka the Obama Refi) becoming available to underwater home owners.

Many responsible home owners who have not been able to refinance under the current guidelines of HARP 2.0 because either their existing home mortgage was securitized after June 1, 2009 by Fannie Mae or Freddie Mac OR because their existing mortgage is not securitized by either Fannie or Freddie. 

The Home Affordable Refi Program was created to help home owners who have lost equity in their homes and would otherwise qualify to refinance (they have employment, income and good credit).

In today’s article, the Treasury may overstep Congress to help make the expanded program that many have been hoping for a reality. From Bloomberg Businessweek

Treasury may act unilaterally to aid borrowers who owe more than their homes are worth if Congress doesn’t pass legislation providing assistance, Stegman, a counselor on housing policy for the agency, said at an American Securitization Forum conference.

“Legislation would facilitate a refinance, whereas under our existing authority, Treasury could only modify the most deeply underwater loans and pay investors for some amount of forgone interest,” Stegman said.

Stay tuned!

Mortgage rate update for the week of January 28, 2013

Mortgage backed securities are in the red this morning. Although rates are still very low, those who have not locked in their mortgage rates may be surprised to see the rate or cost for the rate is now higher.  As the economy continues to show signs of improvement, investors will trade the safety of bonds (like mortgage backed securities) for stocks. 

As of 8:30 am this morning, 3.625% is priced near “par” (with as little rebate credit or discount points) for a 30 year fixed rate-term refinance (apr 3.690).  As you can see, mortgage rates are still very low however, they have been slowly trending higher. Rates change constantly and there are at least 10 factors that impact the pricing of mortgage rates. For your personal mortgage rate quote for your refi or home purchase anywhere in Washington state, click here.

This week is loaded with the FOMC rate decision on Wednesday and Friday’s Jobs Report. Here are some of the scheduled economic indicators and events that may impact mortgage rates this week.

Monday, January 28: Durable Goods Orders and Pending Home Sales

Tuesday, January 29: S&P Case Shiller Home Price Index and Consumer Confidence

Wednesday, January 30: GDP Chain Deflator, ADP National Employment Report, Gross Domestic Product (GDP) and FOMC Meeting

Thursday, January 31: Employment Cost Index (ECI), Personal Consumption Expenditures (PCE), Initial Jobless Claims and Chicago PMI

Friday, February 1: THE JOBS REPORT, ISM Services Index and Consumer Sentiment (UoM)

You can follow me on Twitter for live mortgage rate quotes at @mortgageporter and/or “like me” on Facebook.

If your home is located anywhere in Washington state, where I’m licensed to originate, I’m happy to help you with your mortgage. 

Income Limits for USDA Zero Down Rural Loans


USDA offers a government backed program that allows zero down payment on homes that are in a designated rural community for families earning less than a certain income. A majority of Washington State single family residences (homes and condos) qualify…of course if you live in metropolitan areas like Seattle or Bellevue, odds are your home will not. However, if you’re considering areas like Duvall, parts of Maple Valley, Vashon or Bainbridge Island, it may qualify for zero down financing.

To qualify, families must be without “adequate housing” (may not own a home or adequate home), must have reasonable credit history and be able to afford the mortgage (29/41 is the debt to income ratio guidelines).  

Income limits vary by county and the entire household income is considered (not just the primary borrowers or those borrowers on the mortgage) for determining if the income meets the guidelines.  This is separate from income considered for “debt-to-income” ratios.  USDA loans allow incomes up to 115% of the median income for the area.  Income limits vary on household size from 1-4 person or 5-8 person. 

As of the publishing of this article, in Washington, the income limits by county are:

  • King and Snohomish Counties: 1-4 Person $93,450 | 5-8 Person $123,350
  • Pierce County: 1-4 Person $82,450 | 5-8 Person $108,850
  • Island County: 1-4 Person $89,550 | 5-8 Person $118,200
  • Kitsap County:  1-4 Person $86,950 | 5-8 Person $114,750
  • Thurston County: 1-4 Person $86,250 | 5-8 Person $113,850
  • Clark County: 1-4 Person $83,950 | 5-8 Person $110,800
  • San Juan County: 1-4 Person $78,050 | 5-8 Person $103,050
  • Whatcom County: 1-4 Person $78,000 | 5-8 Person $102,950
  • Benton and Franklin Counties: 1-4 Person $76,800 | 5-8 Person $101,450
  • Skagit County: 1-4 Person $75,750 | 5-8 Person $100,000
  • All other Washington counties:  1-4 Person $74,950| 5-8 Person $98,850

You can check current USDA income limits by visiting the USDA site (clicking here)…be sure to click the “guaranteed” option.   Income limits can and do change. You can also use USDA’s income eligibility calculator which will factor in deductions to income, select the “guaranteed” results (not “direct”).

Income used to determine if a family is under the household income limits includes all those (18 years and older) who will be living in the home regardless of whether or not they’re on the mortgage.  Incomes of children over 18 who working AND who are full time students are not factored. Here is more information of how USDA loans calculate household income.

Once you’ve determined that you meet the household income limits, the next step is to see to see what communities in your area are eligible for USDA financing. You don’t have to go too far from Seattle or Bellevue to find homes that do qualify for this type of mortgage.   Using the USDA site, under “Property Eligibility” click “Single Family Dwelling”.  From there you can either enter a specific address or click on the map to narrow down your search. 

Sellers and real estate agents who are working in neighborhoods that qualify should be sure to include this program as an option they’ll consider for financing on their offers.  

This map is as of the publishing of this post. Areas that are outside of the peachy orange shade are eligible for USDA zero down home loans.


I’m pleased to offer USDA financing as an option for borrowers who meet the criteria. If you have any questions regarding USDA or other mortgage programs for financing homes located anywhere in Washington State, please contact me, I’m happy to help!

How much home do I qualify for with a $70,000 down payment?

I’m working with a couple in Seattle who would like to buy a home. They have excellent credit (scores of 740 or higher) and are planning on using $70,000 for their down payment and closing cost. They want to know how much home they can buy based on their down payment.

The following rate quotes are effective as of January 24, 2013 at 12:20 pm. Rates change constantly, for your personal rate quote for a home located in Washington state, click here.

Conforming High Balance allows them to buy a home priced at $576,000.

The conforming loan limit in Seattle/King-County is currently $506,000. Using a conventional mortgage, they could buy a home priced at $576,000. 

Current mortgage rates for a 30 year fixed conforming high balance ($417,001 – $506,000) based on this scenario is 3.750% (apr 4.094).  

3.750% is priced as close to “par” as possible meaning there is as little rebate credit or discount points priced with the interest rate. We could adjust the rate slightly higher to create more rebate credit to help pay for closing cost or we could reduce the rate by paying more in discount points. 

The loan to value based on a sales price of $576,000 and loan amount of $506,000 is 87.874% which means the Seattle home buyers will have private mortgage insurance (pmi). For this client, we’re opting to include the pmi in their mortgage payment instead of paying it as an upfront additional closing cost or doing “split premium” mortgage insurance.  

The principal and interest payment is $2,343.36 plus private mortgage insurance of $282.52 gives us a “PIMI” payment of $2,625.88. Property taxes and home owners insurance are additional.

The Seattle home buyers will negotiate the seller paying for remaining closing cost and prepaids/reserves estimated at $7900, leaving their amount due at closing very close to $70,000.  If the sellers opt to not pay for closing cost and prepaids, the buyers can use rebate pricing (slightly increasing the mortgage rate) to offset the cost.

FHA allows them to buy a home priced up to $637,500.

FHA mortgages in the Seattle/King County area have a loan limit of $567,500. With a down payment of $70,000 they could buy a home priced up to $637,500. The big difference between FHA and conventional financing is the mortgage insurance. FHA has both upfront and monthly mortgage insurance. 

The current mortgage rate I’m quoting for their FHA scenario is 3.375% (apr 4.059%).

This rate is priced with a little more rebate to help reduce closing cost. If the Seattle home buyers want a lower rate with less rebate credit, they certainly can opt for that. Mortgage rates are not locked until we have a bona fide contract and the rates will be “floating” while they shop for a home.

The principal and interest on this rate and loan amount is $2,552.80 with mortgage insurance at $562.43 providing a PIMI payment of $3,115.23. Property taxes and home owners insurance are additional.

After the rebate credit, if the buyers negotiate the seller paying the remaining balance of their closing cost, prepaids and reserves in the amount of $4,000, the buyers will need around $70,000 for funds due at closing.

VA loans allow them to purchase up to $780,000 with a “VA Jumbo” loan.

The VA zero down loan limit in Seattle is $500,000. When a loan amount exceeds the limit, eligible Veterans can have a down payment based 25% off the difference between the sales price and loan amount.  

For example, a sales price of $780,000 less $500,000 loan limit = $280,000. $280,000 x 25% = $70,000 down payment.

The current rate I’m quoting for this VA Jumbo 30 year fixed loan is 3.250% (apr 3.379).

The principal and interest payment on this loan is $3,136.31. There is no mortgage insurance on a VA loan. Property taxes and home owners insurance are additional. 

If the seller pays for $4500 of the Veteran’s closing cost and prepaids, then the amount due at closing will be around $70,000.

USDA loans are not eligible in the Seattle area because it’s not a rural area.

If you are interested in buying a refinancing a home located anywhere in Washington state, I’m happy to help you. I’ve been originating residential mortgages at Mortgage Master Service Corporation since April 2000. 

Reader Question: Should I Wait to Refi?

One of my returning clients is considering a refinance, however, they’re not sure if they should wait or not.  Their Seattle area home is really close to that magically 80% loan to value – based on best estimates – which would allow them to avoid private mortgage insurance if their home’s value increases.

There are pros and cons to waiting to a refi, similar to those with having an extended closing when you’re buying a home.  Here are a few:

  • changes to home value. Your home’s value may increase as the Seattle markets seems to be doing well with purchase inventory… or a home in the neighborhood that’s a potentially a strong comparable for your appraisal might become a short sale or foreclosure, which may negatively impact your home’s appraised value.
  • changes to employment. If your or your spouse decides to change jobs and it’s not in the same line of work or the new job has a different pay structure, this may impact qualifying.
  • credit scores vary. Credit scores impact the pricing of your rate and underwriting decisions. Lately I’ve been encountering clients who have paid off credit cards and closed them which sounds great, however they now have “shallow credit” and lower credit scores. I’ve also seen late payments on a credit report caused by a parent co-signing for their child. Sometimes it may be worth deciding to delay a refi if you’re trying to improve your scores, or proceeding with the refi and rechecking scores prior to closing.
  • interest rates. Mortgage rates change daily. Sometimes rates change throughout the day. Although it’s anticipated that mortgage rates will remain low for the remainder of the year, members of the Fed have hinted that the Fed should consider no longer buying mortgage backed securities, which has kept rates at their manipulated lower levels. As the economy improves, mortgage rates tend to trend higher.
  • loan programs and guidelines may change. Currently, unless our elected officials take action, HARP 2.0 is set to expire at the end of this year. Banks and lenders currently adjust their underwriting guidelines (aka overlays). And we’re waiting for FHA to increase their mortgage insurance premiums which impacts FHA streamline and non-streamline refi’s. 

Refinancing now is gambling that your home will appraise high enough or you may be out the appraisal fee unless mortgage insurance or a piggy-back second mortgage makes sense to proceed with the refi.

Delaying the refinance adds other potential risk factors assuming you’re satisfied with the current low mortgage rates and you qualify.

I recommend reviewing possible refinance options that are available now and weigh out the pro’s and cons. Refinancing now, should you decide to, also means that you’re reducing your payment and higher interest sooner. 

If you are interested in a mortgage rate quote for your refinance or purchase of a home located anywhere in Washington, click here.  I’m happy to help you!

Mortgage Update for the week of January 21, 2013

It’s another short week with the Martin Luther King Holiday observed today.

President Obama is also being sworn in for his second term. Many home owners are hopeful that President Obama is successful in getting HARP 3.0 and the “Obama Refi” aka #MyRefi programs that he pushed for in his first term, approved and available for those who need to refinance and do not qualify for HARP 2.0 or streamlined refinances, such as FHA, VA or USDA.

Here are some of the economic indicators scheduled to be released this week:

Tuesday, January 22: Existing Home Sales

Thursday, January 24: Initial Jobless Claims

Friday, January 25: New Home Sales

If you are considering buying a home or refinancing a home located in Seattle, Sammamish, Gig Harbor or anywhere in Washington state, I’m happy to help you! Click here if I can provide you with a no-hassle mortgage rate quote.