Archives for February 2013

Updated Income Limits for USDA Zero Down Home Loans

USDA recently published updated income limits for their zero down mortgage program which is available in rural areas. Other mortgage programs, like FHA or conventional, has loan limits which limits availability. USDA does not have loan limits, the program is restricted by household income. 

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 $88,900 | 5-8 Person $117,350
  • Clark and Skamania Counties: 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 $80,300 | 5-8 Person $106,000
  • Benton and Franklin Counties: 1-4 Person $78,000 | 5-8 Person $102,950
  • Skagit County: 1-4 Person $78,000 | 5-8 Person $102,950
  • Asotin County: 1-4 Person $74,750 | 5-8 Person $98,650
  • All other Washington counties:  1-4 Person $74,900| 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!  Click here for a mortgage rate quote for homes located anywhere in Washington.

HARP 3.0 Update

 Last week, Senators Boxer and Menendez reintroduced a bill to Congress that would allow more “responsible home owners” to refinance under the Home Affordable Refinance Program (aka HARP 3).

From the Press Release:

The current average interest rate for a 30-year mortgage is 3.53 percent – a rate that remains near its historical low. Nevertheless, there are nearly 12 million homeowners with loans guaranteed by Fannie Mae and Freddie Mac who could benefit from refinancing, many of whom cannot refinance at a lower rate because of unnecessary red tape and high fees. That red tape has limited competition among banks, so borrowers – even those who are able to refinance – end up paying higher interest rates than they would if they were able to shop around.

Under the Administration’s current refinancing program (HARP), an average homeowner saves about $2,500 per year. This bill would increase the amount they could save and expand refinancing opportunities for millions of eligible borrowers.

S. 249, The Responsible Homeowner Refinancing Act of 2013 removes the barriers preventing these Fannie Mae and Freddie Mac borrowers from refinancing their loans at the lowest rate possible. The bill would:

  • Ensure that streamlined refinancing is available and consistent for all Fannie and Freddie borrowers, regardless of whether they are underwater or not

  • Reduce up-front fees on refinances

  • Eliminate appraisal costs for all borrowers

  • Remove additional barriers to competition

  • Extend HARP by one year, to allow eligible borrowers more time to access the program.

From this press release, I’m not seeing where this bill would help responsible home owners who do not have mortgages securitized by Fannie Mae or Freddie Mac nor am I seeing that this bill would remove the requirement that the mortgage be securitized prior to June 1, 2009.

Stay tuned…I’ll continue to keep you posted.

Mortgage rate update for the week of February 11, 2013

mortgageporter-economyAlthough still very low, mortgage rates have been trending higher. This morning I’m updating a quote for a Seattle home owner who is considering refinancing. The same rate I quoted her a month ago today at “par” (no discount points) will now cost a full discount point or is 0.125 – 0.25% higher in interest rate with similar pricing. I have more on current mortgage rates below.

As the economy improves and the stock market rallies, mortgage rates tend to rise. This is because investors will trade the safety of bonds (like mortgage backed securities) for the potential better return with stocks.

[Read more…]

Keep me posted!

I forgot that postage rates were going up on January 27, 2013. Some of my clients who will be receiving my quarterly newsletter will see an extra $0.01 in postage on this issue! 

“Going postal” will soon mean “taking the weekend off” this summer when Saturday mail delivery ends. It will be interesting to see how this impacts the mortgage process, especially refinances with the right of rescission period. Currently with an owner occupied refinance, three business days must pass after signing before the loan can close. Many consider “three postal” days as three business days. This could cost additional time with some rate lock commitments. Stay tuned!

By the way, I do have a couple extra of my newsletters left over – if you would like me to mail one to you, please send me your name and address.  

Of course if you’re interested in residential mortgage for home purchase, refinance or even a reverse mortgage, I’m happy to help you as long as the home is located in Washington state.

Happy Friday!

The biggest issue with buying a home today in Seattle

Yesterday I met for coffee with one of my clients who is hoping to buy a home in a Seattle area neighborhood for around $600,000. They have already taken one of the most important steps in the home buying process by getting preapproved for a mortgage.

The preapproval process required they complete a loan application and provide me with documentation that supports the information provided on the loan application (such as W2s, paystubs and bank statements). After having a complete application, I am able to run their credit reports and run the scenario through automated underwriting, which provides us with an approval and conditions to that approval.

Here’s a bit from our conversation with a few of their questions.

Is it challenging to qualify for a home in Seattle?

It’s really not that hard to qualify. Presently our underwriting guidelines will allow:

  • a low-mid credit score of 640 for FHA
  • a minimum down payment of 3.5%, which can be gifted by a family member. NOTE: FHA Jumbo’s will soon have a minimum down payment of 5%. In the greater Seattle area, FHA Jumbo’s are loan amounts from $417,001 to $567,500
  • VA home buyers can have a low-mid credit score of 620 with zero down payment up to $500,000. A $600,000 sales price would have a down payment of $25,000 with a VA Jumbo.
  • Home buyers need a two year employment history (sometimes your college education may count as an employment history)
  • Income must be documented and consistent. NOTE: if your self-employed, paid commission or hourly (vs. salary), you will need a two year history and income will be averaged.  NOTE: If you are planning on using your 2012 income, you may want to consider filing your income taxes as soon as possible.
  • Down payment and funds for closing must be documented with complete asset account statements. 

What are the biggest “hiccups” in a transaction?

  • borrowers need to continue providing paystubs and bank statements. Do not toss or shred anything that has to do with your assets or income.
  • large deposits (typically this is anything over $1000) must be documented…so if your Great Aunt Nelly is giving a wad a cash or a check for a birthday present at the time you’re getting ready to buy a home, keep documentation or proof of where the cash came from.
  • if you are planning on using 2012 income for qualifying, you need to file your 2012 tax returns as soon as possible. Lenders re-verify income (beyond W2s or 1040 – tax returns) with tax transcripts from the IRS via Form 4506. As we near “tax season” it takes the IRS longer to process and provide this information.
  • days prior to closing, employment is re-verified. If there are changes to employment or the employer is difficult to reach, this may cause a delay.
  • a “soft” credit pull is done prior to closing as well to make sure no new debts have been acquired by the buyer. If there are new debts, the buyer will need to be re-approved factoring in the debt payments.
  • If the credit report is getting ready to expire prior to closing, a new credit report will be obtained. This may have additional impacts to the transaction if there are changes to debts or credit scores. 

What is the BIGGEST issue with buying a home today in Seattle?  INVENTORY!  

This probably comes to no surprise to Seattle area home buyers in the $300,000 – $700,000 price range hoping to find a non-distressed home to make an offer on. 

If you have been considering selling your home, NOW could be an excellent time to consult with a real estate agent…and I’m happy to recommend one to you! 

As always, if you’re looking to buy a home or refinance your mortgage on a home located anywhere in Washington state, please contact me. I have been originating mortgages at Mortgage Master Service Corporation since April 2000 and I’m happy to help you!

What may impact mortgage rates the week of February 4, 2013

As I write this post (8:10 am) the DOW is down 114 points. Political issues in Europe are giving a boost to mortgage backed securities (bonds) this morning. Remember, when the stock market is getting beat up, traders will seek the safety of bonds. 

Here are some of the scheduled economic indicators for this week:

Tuesday, February 5: ISM Services Index

Thursday, February 7: Initial Jobless Claims and Productivity 

Did you watch Superbowl XLVIII? Did you know that in 34 minutes the lights were out, you could have taken the first steps to either reduce your mortgage rate or start the preapproval process to buy a home? It takes about a half hour to fill out the on-line loan application that I have available on line at Mortgage Porter. My commercial’s over!

Seriously, if I can help you with your mortgage needs on a home located anywhere in Washington, please contact me. I have been helping with refinances and purchase mortgages at Mortgage Master Service Corporation since April 2000.

One reason to buy vs. rent a home

 You can remodel your bathroom without having to get permission from the owner. 

2013 02 01 19 07 26 16

My husband is in the process of remodeling our basement bathroom. You can see a glimpse of the salvaged “ship’s door” that will be the door to the commode. 

I’ll be sure to share more photos of the progress!

It’s official: HUD issues Mortgagee Letter Confirming Changes to FHA Mortgage Insurance

I’ve been writing about pending changes to FHA insured mortgage loans regarding the mortgage insurance premiums. Yesterday, HUD issued Mortgagee Letter 2013-04 which makes the proposed changes “official”. 

We’ve been anticipating changes to how long mortgage insurance will remain on an FHA insured loan as well as increases to FHA’s mortgage insurance premiums.

It’s no surprise that FHA will increase annual mortgage insurance premiums (paid monthly). The first increase goes into effect with case numbers issued April 1, 2013 and later.

  • 30 year fixed with loan to values of 95% or lower will increase to 130 bps (from 120)
  • 30 year fixed with loan to values greater than 95% will increase to 135 bps (from 125)
  • 30 year fixed FHA Jumbos with loan to values of 95% or lower will increase to 150 bps (from 145)
  • 30 year fixed FHA Jumbos with loan to values greater than 95% will increase to 155 bps (from 150)
  • 15 year fixed with loan to value of 78.01% – 90% will increase to 45 bps (from 35)
  • 15 year fixed with loan to values greater than 90% will increase to 70 bps (from 60)
  • 15 year fixed FHA Jumbos with loan to values of 78.01% – 90% will increase to 70 bps (from 60)
  • 15 year fixed FHA Jumbos with loan to values greater than 90% will increase to 95 bps (from 85)

NOTE: in the Seattle – King County area, FHA jumbos are loan amounts from $417,001 to $567,500.

But wait… there’s more!! 

Effective on case numbers issued June 3, 2013 and later, 15 year fixed FHA mortgages with a loan to value of 78% or lower will have annual mortgage insurance of 45 bps. Currently these loans have zero annual mortgage insurance. 

Want to save on your FHA mortgage insurance? Act quickly!! Click here for a mortgage rate quote for homes located anywhere in Washington state.

FHA streamlined refi’s where the current FHA mortgage was endorsed prior to June 1, 2009 are exempt from this adjustment. These loans still qualify for reduced mortgage insurance premiums.

Per the mortgagee letter, this will be effective on case numbers issued June 3, 2013 and later, FHA insured mortgages will change when mortgage insurance can be terminated. Most FHA loans will have mortgage insurance for the term of the mortgage for loans with case numbers issued June 3, 2013 and later. 

Here is a chart from HUD comparing “previous” (in effect now until the new regulation) and “new” (in effect with case numbers issued June 3, 2013 and later).

FHA Annual Premium Cancellation
FHA Annual Premium Cancellation

If you are considering an FHA insured mortgage and would like to have mortgage insurance that one day drops from your mortgage payment – you have a couple months left to do so. The FHA Case number is typically (but not always) ordered at application. 

I am happy to help you with your FHA purchase or refinance on your home located anywhere in Washington state. I have been originating mortgages at Mortgage Master Service Corporation since April 2000, including FHA loans.