Washington State Mortgages, Made Clear. Buying or Refinancing? Let's find the right loan together.
There’s been a lot of recent chatter about the possibility of conforming loan limits being reduced in 2014 that home buyers in the greater Seattle area and home owners should be aware of.
Reuters reports that Denise Dunckel, a spokes person for the FHFA recently stated “a gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayer’s mortgage risk exposure”.
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 and Freddie Mac both offer special incentives to entice buyers to properties they have foreclosed on. Fannie Mae’s program is called Homepath and Freddie Mac’s is Homesteps. Although the names some similar, their incentives are VERY different. What Fannie Mae Homepath and Freddie Mac Homesteps do have in common is that the properties are generally in better shape than other distressed homes.
Wall Street Journal’s Market Watch has named the Seattle – Bellevue – Everett area as one top five markets in the nation for selling your home. From the article:
Homes are flying off the market in Seattle. Listed properties spent a median of 56 days on the market as of January, down 38% from a year ago, according to Realtor.com. That’s almost half the median time homes are listed nationally….
….buyers have been left with a smaller number of homes to bid on, which in turn encourages multiple offers on properties that can push the purchase price higher than the asking price, experts say. There were fewer than 4,000 homes for sale in the Seattle metro area as of January, down 44% from a year prior, according to Realtor.com. [Read more…]
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.
The Federal Housing Financing Agency (FHFA) who oversees Fannie Mae and Freddie Mac, confirmed that conforming limits for 2013 will be unchanged from 2012. This means that a single family 1-unit residence in the greater Seattle area has a conforming loan limit of $506,000. Loan amounts above conforming limits are considered “jumbo” or non-conforming.
Four counties in Washington continue to have “high balance” loan limits above the “general” loan limits:
King County, Snohomish County and Pierce County:
1 Unit: $506,000
2 Unit: $647,750
3 Unit: $783,000
4 Unit: $973,100
San Juan County:
1 Unit: $483,000
2 Unit: $618,300
3 Unit: $747,400
4 Unit: $928,850
The remaining Washington counties have “general” loan limits:
Adams, Asotin, Benton, Chelan, Clallam, Clark, Columbia, Cowlitz, Douglas, Ferry, Franklin, Garfield, Grant, Grays Harbor, Island, Jefferson, Kitsap, Kittatas, Klickitat, Lewis, Mason, Okanogan, Pacific, Pend Oreille, Skagit, Skamania, Spokane, Stevens, Thurston, Wahkiakum, Walla Walla, Whatcom, Whitman and Yakima Counties:
1 Unit: $417,000
2 Unit: $533,850
3 Unit: $645,300
4 Unit: $801,950
Last Friday, the FHFA announced they’re increasing the “guarantee fee” (aka “g-fee”) by an average of additional 0.10 basis points on single family mortgages. What is a guarantee fee? From the FHFA annual report:
Fannie Mae and Freddie Mac acquire single-family mortgages from mortgage companies, commercial banks, credit unions, and other financial institutions. Lenders may exchange loans for mortgage-backed securities (MBS) backed by those mortgages or sell whole loans for cash proceeds.
When lenders receive MBS in exchange for their loans, they may hold them as an investment or sell them in the capital markets. The Enterprises also issue MBS backed by pools of loans acquired from multiple lenders.
Each Enterprise [Fannie Mae or Freddie Mac] guarantees the payment of principal and interest on its MBS and charges a fee for providing that guarantee. The guarantee fee covers projected credit losses from borrower defaults over the life of the loans, administrative costs, float income (or expense), and a return on capital.
From Housing Wire:
Lenders paid an average 28 basis points in 2011 for Fannie and Freddie to guarantee their loans in the bonds issued to investors, up from 26 bps the year before, according to a report released by the FHFA Friday.
The GSEs raised their fees by 10 basis points in April in order to pay for a tax cut passed by Congress in December. But before the enactment, the FHFA pledged to raise the fees through 2012 in order to allow private issuers room to compete.
Do not expect banks or lenders to absorb this cost. The 0.10% increase in basis points will be passed on to consumers and factored into the pricing of mortgage interest rates. This is set to happen towards the end of this year, however I wouldn’t be surprised to see lenders factoring in the fee increase much earlier.
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.
