The Home Affordable Refinance Program is extended…again!

March 22, 2011 by Leave a Comment

Update: Home Affordable Refi Program has been extended through December 2013!

Good news for home owners who have a qualified conventional mortgage where their home has depreciated in value and they want to refinance to a lower rate or more stable program, the Fannie Mae Home Affordable Refinance Program and Freddie Mac's Relief Refinance have been extended to next summer (notes dated on or before June 30, 2012). 

In addition to extending the cut off date for this program, which was scheduled to sunset this summer, Fannie Mae has expanded the loans they will consider for this program.  From their March 14, 2011 announcement:

"Currently to be eligible for Refi Plus or DU Refi Plus the existing mortgage loan being refinanced had to be purchased by Fannie Mae prior to March 1, 2009 or in an MBS pool with an issue date prior to March 1, 2009.  With these program changes, mortgage loans are now eligible if they were purchased by Fannie Mae prior to June 1, 2009 or in an MBS pool with an issue date prior to June 1, 2009….

Loans purchased by Fannie Mae between March 1, 2009 and June 1, 2009 will not recognized by Fannie's underwriting system (DU) until April 11, 2011. 

I am thrilled that Fannie is adding three months of their loans to be eligible for the HARP program which makes the qualifying dates consistant Freddie Mac's program. 

Remember, you do not have to go to your mortgage servicer (who you make your mortgage payment to) for this program…unless you have pmi.  Wouldn't it be great if some of the big banks who have been refusing to consider borrrowers with private mortgage insurance for the HARP program loosen up?  One can hope!  If you're a borrower who's been refused a Home Affordable refi by your bank due to privatate mortgage insurance, you may want to sign this petition.

Related post: 

The Home Affordable Refinance Program extended until next summer  [includes info on Fannie Mae's Home Affordable program].

Freddie Mac's Home Affordable Refinance - Refinance Relief Program

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

Determining Net Rental Income when Qualifying for a Mortgage

January 21, 2011 by 8 Comments

EDITORS NOTE – 11/22/2014: Oh the joys of writing a mortgage blog… guidelines change constantly. Information in this post is not current.  Please check out this more recent article on rental income for conforming mortgages here. And if I can help you with your investment (or any) property) in Washington state, please contact me!

Rental income is generally not fully credited when qualifying for a mortgage.  Lenders will “discount” the rent because of the cost and risk associated with owning investment property.  If someone does not have at least two years history as a landlord, they may not be able to use the rental income at all and may have to qualify with the full mortgage payment.

Conventional financing allows a qualified investor to receive credit for 75% of the gross rental income.  From this figure, property taxes, insurance, home owners association dues and any mortgage payments are deducted to create the amount of rent (positive or negative) that the lender will use for qualifying purposes.

For example, a property has a $2,000 total mortgage payment (PITI) with no HOA dues and receives rental income of $2,000 per month.

$2,000 rental income x 0.75% = $1,500.  $1,500 less the mortgage payment of $2,000 creates a net rental income of negative $500 per month.   This would be factored as a debt and not a credit or “breaking even” on the loan application for qualifying.

Of course if there are multiple investors involved, the net rental income is split accordingly.

FHA does not have the same two year history requirement for existing rentals as conventional loans do.  The vacancy factor in the Seattle area is 15% which means that 85% of the rent is allowed to be factored as income.  FHA loans may use future rental income (no 2 year history) when converting an existing home into a rental if the borrower is being relocated or if there is enough equity in the subject property.

To document rental income, be prepared to provide tax returns and signed lease agreements. Lenders will use the net income from your tax returns.

When you have rental properties, be prepared to have additional reserves (savings) required based on how many properties are owned.

If you have questions about qualifying for a mortgage for a home located in Washington State, please contact me.  If you would like a personal rate quote from me for an home located in Washington state, click here.

Filed Under: Fannie, Freddie and FHFA, FHA, Investment Property, Underwriting and Qualifying Tagged With:

Adjustments to Conventional Mortgage Pricing Means Higher Rates on January 1, 2011

December 30, 2010 by 1 Comment

UPDATE DEC 19, 2013: New (more expensive) LLPA’s have been released.

UPDATE JAN 3, 2011:  Not all lenders are implementing this fee increase (yet).  This is perfect example of an advantage of working with a correspondent lender since we work with more than one bank or one banks products/rates. 

Conventional mortgages (Fannie Mae and Freddie Mac) are increasing their LLPA, also known as “Loan-Level Price Adjustment” effective on all mortgages with a term greater than 15 years on loans they purchase on April 1, 2011 or later.   Although this doesn’t go into effect until April Fools, wholesale lenders will make these adjustments to their rate sheets well in advance so that they don’t have to take the price hit when the sell the loan to Fannie or Freddie.   I am receiving memos from the lenders we work with stating that these price adjustments will go into effect on loans locked January 3, 2011.

The new price adjustments are outlined in the red box below.  The changed adjustements are in bold in the red box (click on image to enlarge).  You can view Fannie Mae’s complete LLPA schedule here – there are additional hits that may apply depending on your scenario (such as condos, subordinate financing, etc.).

FannieLLPA

LLPA’s are nothing new.  We’ve had them for the past couple of years and the adjustments are typically factored into your rate.  Remember, typically (but not always) 1% in fee equals 0.25% in rate.   So if your “low-mid” credit score is 700 – 719 and your loan to value is 75.01% or higher, your interest rate is going to be about 0.25% higher in rate than someone with a 740 or higher credit score with a loan to value of 60.01 – 75%.

The hardest hit with this adjustment is borrowers with credit scores of 699 – 640 with loan to values over 80%.   These borrowers should consider FHA insured loans for financing which do not have the same level of price hits as conventional (at this time).

The best pricing is for borrowers with credit scores 700 or higher AND a loan to value of 60% or lower.   Borrowers with a 740 or higher credit score and less than 25% down payment or home equity will now be hit with a 0.25% adjustment.

These price hits impacts loan amounts of $567,500 or lower for homes located in King, Snohomish and Pierce Counties.   For a complete list of Washington state conforming loan limits, click here.

Risk based pricing is one more reason why people who are considering a mortgage, regardless of if it’s to purchase a new home in Seattle or refinance their existing home in Bellevue, should start early with the preapproval process.  Just being one digit off on your low-mid credit score may cost you.  A qualified mortgage professional can help you make the right moves with the goal of improving  your credit score if given enough time.

If you need a mortgage for a home located in Washington State, I’m happy to help you.  I’ve been originating mortgages at Mortgage Master Service Corporation since April 2000 and I’ve been licensed since 2007 (when mortgage originator licensing was first mandated in Washington).

Filed Under: Credit Scores and Reporting, Fannie, Freddie and FHFA, FHA

2011 Conforming Loan Limits for Washington State

November 19, 2010 by Leave a Comment

Fannie Mae issued their confimation that the current loan limits of 2010 will continue through 2011 with certain "high cost areas", like Seattle, Bellevue, Everett or Tacoma, retaining the temporary high balance loan limits for loans originated through September 30, 2011.    

High Balance loans are set to roll back to lower limits previously set with loans originated October 1, 2010.  For the great Seattle area, that means that loan amounts over $506,000 will be considered non-conforming (jumbo rates and underwriting guidelines) for a single family dwelling.   I'll be sure to write more about this as that time approaches.  Click here for loan limits effective October 1, 2011 through December 31, 2011 in Washington.

High Balance Loan Limits for Washington State until September 30, 2011:

King, Pierce and Snohomish Counties

 1 Unit – $567,500

 2 Unit – $726,500

3 Unit – $878,150

4 Unit – $1,091,350

Clark and Skamania Counties

1 Unit – $418,750

2 Unit – $536,050

3 Unit – $648,000

4 Unit – $805,300

Jefferson County

1 Unit – $437,500

2 Unit – $560,050

3 Unit – $677,000

4 Unit – $841,350

Kitsap County

1 Unit – $475,000

2 Unit – $608,100

3 Unit – $735,050

4 Unit – $913,450

San Juan County

1 Unit – $593,750

2 Unit – $760,100

3 Unit – $918,800

4 Unit – $1,141,850

NOTE:  The following Washington counties do not have "high-cost area loan limits": Adams, Asotin, Benton, Chelan, Clallam, Columbia, Cowlitz, Douglas, Ferry, Franklin, Garfield, Grant, Grays Harbor, Island, Kittitas, Klickitat, Lewis, Lincoln, Mason, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Thurston, Wahkiakum, Walla Walla, Whatcom, Whitman and Yakima.

Conforming Loan Limits for 2011

1 Unit – $417,000

2 Unit – $533,850

3 Unit – $645,300

4 Unit – $801,950

Download loan limits here.

Filed Under: Fannie, Freddie and FHFA

Fannie Mae’s HomePath Program

October 15, 2010 by Leave a Comment

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.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, First Time Home Buyer, Homepath, Investment Property, Residential Purchase Tagged With: , , ,

Pricing a Home Affordable Refinance

July 1, 2010 by 1 Comment

Home Affordable Refinances allow home owners with conventional mortgages (Fannie Mae or Freddie Mac) who have had their homes depreciate refinance at competitive market rates.  

Factors that impact the mortgage interest rate are:

  • loan to value (new loan amount divided by the appraised value)
  • the lowest middle credit score of all borrowers on the loan
  • lock period and loan loan amount

A Seattle couple who purchased their home in 2005 for $400,000 with a 20% down payment with an interest only mortgage still has a loan balance of $320,000 if they have not made any additional payments towards principal.  This couple has excellent credit and is interested in refinancing but the big mystery is how much the home will appraise for since it's based on what other homes similar to theirs have recently sold and closed for.  

They currently make their mortgage payments to Chase and their mortgage is securitized by Freddie Mac, which means they probably qualify for the Freddie's Home Affordable Refinance Program:  Relief Refinance Mortgage.  With this mortgage, the loan amount is limited to current balance plus $5,000.   In order to limit the amount of cash possibly due at closing, I often price the rate at zero points to reduce closing costs.

Here's what current rates would look like based on different appraised values using a 30 year fixed rate priced with zero points (origination or discount):

Loan to value of up to 95%:  4.500% with 0 points (apr 4.571%).  This would be the same rate if the home has a loan to value of 80% (roughly $410,000).   Based on the Seattle couple's scenario, their home would need to appraise for $340,000 or more to qualify for this rate.

Loan to value over 95% and up to 97%:  4.625% with 0 points (apr 4.697%).  The home would need to appraise for around $335,000.

Loan to value over 97% and up to 105%:  4.750% with 0 points (apr 4.823%).  The home would need to appraise for at least $310,000.

Unless it seems real obvious to me what the homes appraised value may be, I tend to lock based on the worse case "possible scenario".  Once we receive the appraisal, we can adjust the rate accordingly.   If the appraisal comes in lower than the worse case "possible scenario", the home owner does have options, including bringing in cash to closing or terminating the refinance at the cost of the appraisal deposit.

Fannie Mae and Freddie Mac's Home Affordable Refinance program is helping many Washington state homeowners reduce their mortgage payments or convert their adjustable rate or interest only mortgage into a fully amortized mortgage.   This program is available for owner occupied, vacation homes and rental/investment property. 

Filed Under: Adjustable Rate Mortgage (ARM), Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

Historic Low Mortgage Rates May Help Seattle Area Homeowners

June 29, 2010 by Leave a Comment

The mortgage rates we're witnessing today can help many Washington state homeowners if they take advantage by refinancing.  Even if your home's value has declined due to your homes in your neighborhood selling for less, you may still have options thanks to the Home Affordable Refinance program (set to expire in 2011) and FHA streamline refinances. 

Many of the home owners I'm helping with refinancing are:

  • reducing their monthly mortgage and creating more monthly cash flow to help with their budgets;
  • converting adjustable rate mortgages or interest only mortgage to fixed rates;
  • shortening their mortgage terms;
  • paying off second mortgage by including them in their refinance or paying off debts.

The Home Affordable refinance(HARP) is available for conventional loans that are securitized by Fannie Mae or Freddie Mac–this is different than who you make your mortgage payment to (the bank or mortgage servicer).   The Making Home Affordable Program allows for negative home equity and may not require an appraisal.  If your current mortgage doesn't have private mortgage insurance, then the new Home Affordable refi will not have mortgage insurance either–regardless of the loan to value!  This program is available for owner occupied, rental homes and vacation homes.   NOTE:  Second mortgages cannot be paid off with this program, however they can be subordinated.

Here's an example of HARP refi quotes (as of 12:30 today) based on a loan amount of $400,000 and an appraised value of $381,000 (roughly 105% loan to value) using a 30 year fixed with mid-credit scores of 740 and priced with zero points (origination or discount):

Owner occupied:  4.750% (apr 4.813) priced with 0 points.

Investment property/non-owner occupied:  5.125% (apr 5.360) priced with 0 points.

If your current mortgage is FHA, then you can opt for an FHA streamlined refinance.  If you have a little equity, you can opt to have an appraisal and finance up to 97% of the appraised value to include your closing costs and prepaids.   If your home does not have equity, and you have the funds available, a "no appraisal" option is available.  With the no-appraisal streamline FHA refinance, closing costs and prepaids cannot be financed.  Your loan amount is limited to your current balance less a possible credit of your original upfront mortgage insurance premium and your new upfront mortgage insurance premium can be financed.  

Here are FHA refinance rates (as of 12:30 today):

4.500% priced with 0 points (apr 5.090) appraisal optional.  Loan amounts up to $417,000.

4.750% priced with 0 points (apr 5.518) appraisal optional.  Loan amounts $417,001 – $567,500 in King, Pierce and Snohomish Counties.

FHA currently will allow up to an 85% loan to value for a "cash-out" refinance, which may include paying off a second non-purchase money second mortgage.  "Cash-out" would not be a FHA streamlined refinance and would require an appraisal.

If you have enough home equity, you may not need to do a streamline or Home Affordable refinance.  But it's nice to know your options!   If I can help you review your mortgage scenario, for a refinance or purchase, on a home located in Washington state, or if you would like your personal rate quote, please contact me!

Filed Under: Fannie, Freddie and FHFA, FHA, Refinance

Freddie Mac’s Home Affordable Refinance – Relief Refinance Mortgages

June 22, 2010 by 2 Comments

I've written about Fannie Mae's HARP program a few times here at Mortgage Porter, but I've neglected to write much about Freddie Mac's version.  This is partly due to the fact that when the Home Affordable program began, loans securitized by Freddie Mac required that you had to go back to your mortgage servicer: THIS IS NO LONGER TRUE.  In addition, Fannie Mae has a much larger market share than Freddie so I've been helping more Seattle area home owners who have lost equity with Fannie's program.   I'm pleased that Freddie Mac has expanded this program (Open Access) to not force home owners to return to the mortgage servicer which means, I can probably help you if your mortgage is owned by Freddie Mac (or Fannie Mae). 

Freddie Mac's program offers "borrowers who are current on their mortgage payments the ability to refinance to improve their financial situation when home values have declined…"   If you are behind on your Freddie Mac owned mortgage, you may qualify for the Home Affordable Modification.  I do not do loan mods.

Here's some information about Freddie Mac's Home Affordable "Relief Refinance" (if  you're mortgage is owned by Fannie Mae, click here).  Although some of these guidelines are similar to Fannie Mae, there are some differences.

In order to qualify for this program, your mortgage must be securitized (owned) by Freddie Mac prior to June 1, 2009 and be in first lien position.   To see if Freddie Mac owns your mortgage, click here.

The loan amount is limited to the mortgage balance plus the lesser of $5,000 or 4% of the current balance.  And the maximum cash back a borrower may receive is $250.   For example, if your current mortgage balance is $400,000, the most your new loan amount could be is $405,000.  You may find that you either need to bring cash in to close (typically a mortgage payment) or price the mortgage with zero points (while Congress still allows this as they're trying to ban rebate pricing). 

For King, Snohomish and Pierce counties, the maximum loan amount is $567,500 for a single family dwelling. 

This program is available for primary residences, second homes and investment properties.

If your original mortgage did not have private mortgage insurance, the new mortgage will not have private mortgage insurance even if your current loan to value is over 80%.

There must be a benefit to the borrower, such as a reduction in interest rate, replacing an adjustable rate mortgage with a fixed or a reduction in term.

Borrowers must be current on their mortgages with no "30 day late payments" in the last 12 months.

Second mortgages must be subordinated (they cannot be included or paid off with the refinance).  Most second mortgage lien holders are cooperating–but it is their call on whether or not they will permit the subordination to take place.

A full appraisal is required and loan to values up to 125% are permitted.

Income and employment are verified.  Minimum credit score is a 620.

The Home Affordable Refinance Program is scheduled to end in June 2011 2012.   If you're interested in a rate quote for your mortgage, at no obligation, to see if refinancing makes sense for your Washington state home, please contact me.

NOTE:  This post has been updated to reflect the extension of the HARP refi.

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance
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