“Going Above and Beyond” is Doing Our Jobs

May 22, 2011 by 2 Comments

2011-05-20_09-46-37_561 I received a really nice thank you card from Shannon Ressler at Findwell Realty last week that I want to share with you. We recently helped Shannon's clients buy a vintage bungalow that was a short sell in the Magnolia neighborhood of Seattle using an FHA insured mortgage. Being a short sell and an FHA insured loan, there was no shortage of paper work and the transaction was coming "down to the wire".  

Closing was set to take place on Friday…and early Thursday morning, I received a message from one of our buyers saying he was flying out at noon for a family event…he'd be back on Monday. Luckily Mike was able to reschedule his flight until four, however, we were still in a crunch to get docs out.  NOTE:  I normally like to have loan docs out several days before signing…but sometimes transactions (especially short sales) don't happen that way.

Extentending contracts with short sales can be a chore since in addition to dealing with a buyer and a seller, you also have the seller's lender.  Adding to this, I had renegotiated our clients interest rate lock lower and the lender I had the rate locked with charges a higher extension fee once a rate lock has been renegotiated.  We really needed to close on time.

We were able to rush loan docs out to the escrow company.  As a correspondent lender, we prepare our loan docs at our main office in Kent and we make our own underwriting decisions (following guidelines, of course)…escrow was gracious receiving loan docs last minute AND THEN, their system crashes.  I have to say, I've never had this happen!  Mike's flight out was rapidly approaching.  We were running out of time and escrow's computers were not cooperating.

Marilyn Porter, President of Mortgage Master Service Corporation (and my sister-in-law) had an additional set of their loan docs printed and we arranged to meet our buyers at Sharps Roasters by SeaTac Airport.  While we were heading to Sharps, Mike and Mary obtained their cashiers checks for the estimated amount due for closing. Marilyn even had a couple orders of sliders and fries waiting for everyone…figuring with all the rushing around, they'd probably be hungry.

By the time we were done with the signing, escrow's system was back up and they emailed their docs (escrow instructions, estimated HUD-1 Settlement Statement) to our clients to sign and return. I created a video review of their estimated HUD since escrow was not able to review it with them.  

Our job wasn't over. Escrow needed the buyer's cashiers checks before 4:00 that day in order to have them in time for funding tomorrow. We wound up having the wire instructions emailed to our phones and we deposited the buyers checks directly into escrow's accounts.  

And, I'm happy to say that we DID fund and close on time. 

I am so proud of the crew I work with at Mortgage Master Service Corporation. 

Thank YOU Shannon, for your recommendation and thoughtful card!  Shannon was an asset throughout this transaction, it was a great team effort from all.

Filed Under: FHA, Food and Drink, Mortgage, People, Real Estate Agents

Considering a Mortgage Between $506,001 and $567,500 in King, Pierce or Snohomish Counties? Act Soon!

May 17, 2011 by Leave a Comment

Our current FHA and Conforming High Balance loan limits are scheduled to roll back on October 1, 2011 unless Congress decides to act quickly and extend them.  In the greater Seattle area, the loan limit for a single family dwelling is $567,500, after September 30, 2011, the conforming limit is set to be reduced to $506,000.  The difference of $61,500 will impact home owners, home buyers and sellers alike.

If you are a home owner in King, Pierce or Snohomish County considering a refinance and your loan amount is higher than $506,000; effective October 1, 2011 your loan amount will be considered a non-conforming (aka a jumbo).   This will impact all counties in Washington State who currently have temporary "high balance" loan limits.

Notes dated after September 30, 2011, conforming loan limits are set to return to those as set forth per the Housing and Economic Recovery Act of 2008 (HERA).  For single family homes, conforming loan limits look like this as of October 1, 2011:

King, Pierce and Snohomish Counties: $506,000 from the current $567,500, a $61,500 reduction.

San Juan County: $483,000 from the current $593,750, a $110,750 reduction in loan limit.

Kitsap County: $417,000 from $475,000, a $58,000 reduction.

All other counties will have a maximum conforming loan amount of $417,000.

Lenders will start to implement this well before the September 30th deadline as no one wants to be left holding yesterday's high balance loan amount when the limits have dropped as they'd have a jumbo mortgage with a conforming rate.   Since the effective date is based on the Note date and not when an application is taken, this will cause the new loan amounts to appear sometime this summer in my estimation.

If you are considering a refinance and your loan amount is above the future loan limit and below the current (between $506,000 and $567,500 in Seattle or Bellevue) you don't want to delay!  Having less financing options available for homes may also impact appraised values as fewer people will qualify based on the jumbo guidelines.

If you are considering buying a home and you're not wanting to come up with the additional down payment required to make up the "gap" between the loan limits, you may want to try finding that home by early summer and close well before September 30, 2011.

If you are selling a home that would be ideal for a "high balance conforming" borrower (in the Seattle/Bellevue area, that would be a sales price of $700,000 to $500,000), I suggest you make sure you price your home competitively and consider all types of financing (including FHA and VA).  Once the new loan limits go into effect, you've lost a lot of potential buyers who may not be eager to come up with the additional funds to stay in the conforming or FHA market. 

If you're a Listing Agent, please do your clients a favor and accept FHA and VA offers.  

I'll continue to keep you posted as more information becomes available.

Filed Under: Fannie, Freddie and FHFA, FHA

How much can Sellers contribute towards Closing Cost?

May 12, 2011 by 10 Comments

If negotiated in your purchase and sales agreement, a Seller may agree to chip in towards some or all of your bona fide closing costs, prepaids and reserves.  They cannot contribute towards your down payment.  The amount the seller can contribute varies depending on the program type and the amount of home buyer’s down payment. The percentage is based on the sales price and if the credit exceeds the closing cost, the mortgage originator can often use it towards discount points to buy down the interest rate.

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Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Underwriting and Qualifying, USDA, VA Mortgage Loans Tagged With: , , , , , , ,

FHA Mortgage Insurance Increasing in April

March 24, 2011 by 4 Comments

NOTE: I originally published this article in February when HUD published the Mortgagee Letter. However with the increase to mortgage insurance on FHA insured loans just around the corner, I thought I should re-post this. If you are purchasing a home or refinanacing using an FHA insured loan, you will want to be in contract and have your loan application complete no later than April 13, 2011 to insure having an FHA Case Number issued in time.

Yesterday HUD issued Mortgagee Letter 11-10, making it official that FHA annual mortgage insurance will increase another 0.25% basis points on case numbers issued on or after April 18, 2011. The annual mortgage insurance is included in the monthly mortgage payment. There is no change (at this time) to the upfront mortgage insurance which is paid for at closing (typically financed or may be paid as a closing cost). This is in line with the Obama Administration's plan for reforming mortgages which was revealed on Friday.

HUDmip

Here's how this will pencil out for a 30 year fixed mortgage based on a sales price of $400,000 with a minimum down payment of 3.5% (base loan amount of $386,000).

FHA mortgages with a case number issued prior to April 18, 2011 (current as of this post):

386,000 x .90% = 3,474/12 months = $289.50.

FHA mortgages with a case number issued April 18, 2011 or later:

386,000 x 1.10 1.15% = 4,246 4,439/12 months = $353.83 $369.92

Difference in monthly payment: $64.33. $80.42

This will also impact FHA 203k rehab loans.

Remember, FHA annual mortgage insurance remains on the loan for a minimum of 60 payments regardless of loan to value. Even if a home buyer is putting down 20% towards the purchase of their Seattle area home, they will still have FHA mortgage insurance. FHA mortgage insurance will also remain on the home until the loan balance reaches 78% of the loan to value based on the original appraised value or purchase price of the home (which ever was less).

I have been originating FHA insured loans for the past eleven years at Mortgage Master Service Corporation (a Direct Endorsed HUD approved lender). I am licensed to originate mortgages for homes located in the State of Washington. If I can help you with your mortgage needs, please let me know!

Filed Under: FHA, Mortgage Insurance

FHA Mortgage Insurance to Increase in April

February 15, 2011 by Leave a Comment

Yesterday HUD issued Mortgagee Letter 11-10, making it official that FHA annual mortgage insurance will increase another 0.25% basis points on case numbers issued on or after April 18, 2011.   The annual mortgage insurance is included in the monthly mortgage payment.  There is no change (at this time) to the upfront mortgage insurance which is paid for at closing (typically financed or may be paid as a closing cost).  This is in line with the Obama Administration's plan for reforming mortgages which was revealed on Friday.

HUDmip 

Here's how this will pencil out for a 30 year fixed mortgage based on a sales price of $400,000 with a minimum down payment of 3.5% (base loan amount of $386,000).

FHA mortgages with a case number issued prior to April 18, 2011 (current as of this post):

386,000 x .90% = 3,474/12 months = $289.50.

FHA mortgages with a case number issued April 18, 2011 or later:

386,000 x 1.10% = 4,246/12 months = $353.83

Difference in monthly payment: $64.33.

This will also impact FHA 203k rehab loans.

Remember, FHA annual mortgage insurance remains on the loan for a minimum of 60 payments regardless of loan to value.  Even if a home buyer is putting down 20% towards the purchase of their Seattle area home, they will still have FHA mortgage insurance.   FHA mortgage insurance will also remain on the home until the loan balance reaches 78% of the loan to value based on the original appraised value or purchase price of the home (which ever was less).

I have been originating FHA insured loans for the past eleven years at Mortgage Master Service Corporation (a Direct Endorsed HUD approved lender).  I am licensed to originate mortgages for homes located in the State of Washington.  If I can help you with your mortgage needs, please let me know!

Filed Under: FHA, Mortgage Insurance

FHA 203(k) Rehab Loans

February 4, 2011 by 4 Comments

mortgageporterhouseEDITORS NOTE: We currently do FULL FHA 203k Rehab loans instead of streamline and loan limits have changed since this post was written in 2011.

HUD’s FHA 203(k) loans are very popular right now considering the many homes that may have been abandoned or neglected and need some TLC.  FHA 203(k) loans allows the cost of certain repairs and improvements to be added to the sales price which essentially provides borrowers an “all in one” home repair loan for permanent financing.  The down payment is basically based off of the sales price plus the costs associated with the improvements using FHA’s minimum allowed down payment. FHA 203k loans are  a great choice for fixer-uppers or homes that need some modernization.

The maximum loan amount for a purchase using 203k financing is the lesser of the “as-is” value of the property (based on the appraisal) plus the rehab cost or 110% of the expected “after value” with the rehab.  The maximum loan amount is limited FHA’s loan limits.  See below for current FHA loan limits in Washington state.

This program is one-to-four unit dwellings and FHA approved condos as long as the homes are owner occupied.  This program does not allow investors.  Most improvements are eligible as long as they add value and are permanently affixed to the foundation. Just a few examples of improvements include painting, room additions, kitchen remodeling, roofing and decks.  Luxury items (such as swimming pools) and improvements to detached structures are not permitted.

Certain expenses are eligible to be included in the 203k loan, such as:

  • the cost of the materials used in the rehab
  • labor
  • permits, fees, inspections by qualified home inspector
  • up to six months of mortgage payments (while your home is being renovated, you will be making the mortgage payments)
  • a contingency reserve (around 15% depending on the project)

A HUD approved consultant works with the borrower to help determine what improvements FHA will require (such as energy conservation, local codes, safety, etc.) as well as the improvements the buyer would like to have done.   The consultant will develop a list of proposed improvements that will be submitted to the lender for review.

Rehabilitation construction must start within 30 days of closing with all work completed within six months of closing.

PS: FHA 203k rehab loans are not just for home buyers, they can be used to refinance an existing mortgage and pay for improving a home too!

If you would like more information about FHA’s 203k Rehab loan for home located in Washington state, please contact me.  I have been originating FHA loans at Mortgage Master Service Company since April 2000.

Filed Under: FHA Tagged With: , ,

FHA 5/1 Adjustable Rate Mortgage

February 2, 2011 by Leave a Comment

FHA ARMs are extra special in my eyes.  I like that they have very low caps limiting how much they can adjust after the fixed rate period is over.  Plus, FHA loans may be assumable to a qualified borrower in the future should you decide to sell your home.  Today's fixed rates have about a 1 point difference between a 30 year and a 5/1 ARM, but with a 1% rate cap, worse case scenario, the 5/1 ARM will reach today's 30 year fixed rate at it's first adjustment and keep that adjusted rate for one year.  Let's see how this pencils out. 

NOTE: for a current rate quote for an FHA ARM or any mortgage for a home located in Washington, click here.

As of 12:45 p.m. Feb.  2, 2011, based on a credit score of 720 with a sales price of $400,000 and a down payment of 3.5%, I would quote the following:

30 year fixed FHA with zero points: 4.750% (APR 5.497).  Principal, interest and mortgage insurance payment:  $2,321.16.  ($2033.69 plus $287.08 monthly mortgage insurance).

5/1 FHA ARM with zero points: 3.750% (APR 6.521).  Principal, interest and mortgage insurance payment: $2,082.58.  ($1805.50 plus $287.08 monthly m.i.). 

Based on this pricing, the difference in monthly savings with the ARM is $238.56.  Over five years, the savings is about $14,315. 

The FHA 5/1 ARM has caps of 1/1/5.  This means that the most this rate can adjust on the first adjustment date (after 60 months) is up or down 1%.  Using the scenario above, the highest the rate can adjust to is 4.75% and the lowest is 2.75%.  The rate will continue to adjust annually no more than 1% up or down for the remainder of the term or as long as the mortgage is retained.  The highest the rate can ever be 5% higher than the note rate (this is called the "ceiling").  With this scenario, that would be 8.750%; however it would take 5 years (after the five year fixed period is over) for the rate to adjust that high. 

Here's what the principal, interest and mortgage insurance (PIMI) would look like "worst case" scenario assuming your first payment is made today and the rate only adjusts upwards:

PIMI Payments from 2/1/11 – 1/1/16 at $2,082.58 at 3.750%.  (Rate fixed for 5 years).

PIMI Payments from 2/1/16 – 1/1/17 at $2,259.96 at 4.750%.  (Maximum increase in rate of 1%).

PIMI Payments from 2/1/17 – 1/1/18 at $2,454.06 at 5.750%. 

PIMI Payments from 2/1/18 – 1/1/19 at $2,650.82 at 6.750%.

PIMI Payment from 2/1/19 – 1/1/20 at $2,849.23 at 7.750%. 

MI Payment (see NOTE below) from 2/1/2020 to 1/1/2021 at $2,818.20 at 8.750% $310,638.

The rate will continue to adjust annually (on the anniversary date of the first adjustment) and will be reamortized based on the remaining term. The rate can adjust by as little as 0.125% but never more than by 1% up or down and never higher than 5% of the Note rate.

NOTE:  FHA monthly mortgage insurance drops off after the loan balance reaches 78% of the value (based on the original value of $400,000 = $312,000) and a minimum of 60 payments have been made.  Assuming all payments are made as scheduled, the home owner will reach 78% around 108 payments (9 years) with the adjustable rate mortgage.   With the 30 year fixed rate, it will actually take closer to 120 months (10 years) to reach the 78% threshold before the monthly mortgage insurance drops from the payment.  Additional payments can be made towards principal but the earliest the mi will be removed regardless of loan to value is 60 months.

The scenarios above are assuming that we finance the upfront mortgage insurance premium of 1%.  Another option is for the 1% to not be financed and paid as a closing cost…even the seller can pay for the upfront mortgage insurance premium.  At this point, Sellers can still contribute up to 6% of the sales price towards closing costs and prepaids; they cannot pay any of the down payment.  

Although my quote was based on a 720 mid-credit score.  We're currently approving FHA loans with low mid-credit scores down to 640.

The loan limits for FHA loans in King, Pierce and Snohomish County is currently $567,500 (until October 1, 2011).   

Is an adjustable rate mortgage right for you?  It depends on your personal scenario is and if you can stomach having your rate change.  The 1/1/5 caps are certainly more tolerable than the 5/2/5 caps that most conventional ARMS tend ot have.  At any rate, it's good to know what your mortgage options are.

If you are considering buying or refinancing a home located in Washington state, I'm happy to help you!

Filed Under: Adjustable Rate Mortgage (ARM), FHA, Mortgage Insurance Tagged With:

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:
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