Helping Washington State homeowners learn more about their mortgage options.
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.
If you have flipped 10-12 house in the Seattle area, A & E’s "Flip This House" is looking for YOU! Read all about it here.
A tip of the hat to ARDELL.
One of my clients contacted me with this question:
"We’re in the early stages of thinking about buying a rental house. If we were to buy a house for $260,000, how much would we have to put down and what would the payments be like for a 30 year mortgage?"
Mortgage interest rates for investment properties are priced based on loan to value (how much money the investor is putting into the property) and the lowest mid-credit score of the borrower(s). The price breaks are based at 70, 75 and 80% loan to value (LTV). Based on a sales price of $260,000; here is what current rates would look like using a 30 year fixed rate mortgage and a mid-credit score of 720.
Non Owner Occupied with 20% Down — Loan amount of $208,000 with a rate of 6.875% (APR 7.074%). Principal and Interest (P&I) = $1366.41 plus taxes and insurance (on all payments shown).
Non Owner Occupied with 25% Down — Loan amount of $195,000 with a rate of 6.750% (APR 6.952%). P&I = $1264.77.
Non Owner Occupied (NOO) with 30 % Down — Loan amount of $182,000 with a rate of 6.625% (APR 6.830%). P&I = $1165.37.
Another option to consider may be a 30 Year Fixed Rate with the 10 Year Interest Only payments. You must qualify at the fully amortized rate and after 10 years, assuming you still have retained the mortgage, the mortgage balance at that time will be amortized for 20 years. If you never pay additional towards your principal during the first 10 years, your mortgage balance will be the same as when the mortgage was originated. Here are rates based on the same scenario above with the interest only feature.
NOO with 20% Down — Loan amount of $208,000 with a rate of 7.250% (APR 7.439%). Interest only payment of $1248.00.
NOO with 25% Down — Loan amount of $195,000 with a rate of 7.000% (APR 7.188%). Interest only payment of $1137.50.
NOO with 30% Down –Loan amount of $182,000 with a rate of 6.875% (APR 7.066%). Interest only payment of $1042.71.
I’ve written more about about financing investment properties here.
Do you have a mortgage question for me? Send me an email, I’m happy to help and your question may help others.
Mortgage Guaranty Insurance Corporation, a private mortgage insurance company, has included Pierce County as a "restricted market" limiting the loan to value to 95% for what they will insure effective March 3, 2008.
Private mortgage insurance is used when a borrower has less than 20% down and are not using a second mortgage to bridge the gap between the down payment and 80% loan to value. MGIC is just one of the big players in the private mortgage insurance industry.
From MGIC’s site:
MGIC has designated a number of Core-Based Statistical Areas (CBSA) as "Restricted Markets." A CBSA is the official term for a functional region based around an urban center of at least 10,000 people, based on standards published by the Office of Management and Budget. Loans secured by properties in these areas must follow MGIC’s Restricted Markets underwriting guidelines.
In determining whether to place a market on the restricted markets list, MGIC uses both external and internal information sources including OFHEO Home Price Indices, National Association of Realtors change in median home prices, Moody’s Ecomony.com home price projections and MGIC’s own proprietary business mix and performance data.
Here are other MGIC guidelines for restricted markets:
MGIC will not insure the following in a restricted market:
It’s important to note that MGIC is not the only private mortgage insurance company. Other pmi companies are also restricting their guidelines. Effective March 1, 2008, PMI Mortgage Insurance Company will no longer insure mortgages with a loan to value of 97.01% or higher anywhere.
These changes will also impact LMPI (lender paid mortgage insurance) programs where the private mortgage insurance is financed into the rate as well as Fannie Flex programs depending on where your lender is able to obtain private mortgage insurance. As of this moment, 1:40 p.m. on February 15, I still have Flex 100 with LPMI.
The mortgage industry continues to tighten their guidelines as well. In fact, earlier this week, Washington Mutual declared most zip codes (including Seattle, Bellevue) in Washington state as "soft" reducing the amount they will lend by 5% of the total allowed loan to value.
This is a great case for using FHA mortgages if the current loan limit works for your mortgage needs.
If you are buying a home in Pierce County and are planning on putting less than 10% down, please contact your Mortgage Professional.
Update 5:37 pm 2/15/2007: You may want to read Kenneth R Harney’s article on MGIC.
Telling a lender you’re going to occupy (live in) a property and then not doing so is a form of fraud. I’m amazed at how people what steps people will take in order to shave a little bit off of their interest rate (NOO is roughly 0.5% higher in rate for a 20% down fixed conforming product).
Here are basic lender guidelines for what is considered "owner occupied":
Second or vacation homes have these guidelines:
If your property does not meet the guidelines above, it may very well be considered an investment property (non-owner occupied) in the eyes of an underwriter. Recently new guidelines became available that accommodate borrowers helping family members, such as The Family Opportunity Mortgage.
Many of the guidelines are up to underwriter discretion and plain old common sense. If you are buying a home as "owner occupied", the lender is anticipating that you will live in the property.
If you have other intentions, it’s important that you openly discuss them with your Mortgage Professional so that you don’t unintentionally commit lender fraud.
The FBI states on their press release from December 2005:
Mortgage Fraud is one of the fastest growing white collar crimes in the United States. Mortgage Fraud is defined as a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan….The borrower makes a few misrepresentations, usually regarding income, personal debt, and property value, or there are down payment problems. The borrower wants the property and intends to repay the loan. Sometimes industry professionals are involved in coaching the borrower so that they qualify. Fraud for Property/Housing accounts for 20 percent of all fraud
When you’re obtaining a conforming mortgage, at application and again at closing, you sign affidavits stating that you intend to occupy (or not to occupy) the property that is being mortgaged. It is much better for you to be upfront and ask your Mortgage Professional if your situation meets the guidelines of an owner occupied property than to have the lender call your Note due, or worse…how about a little jail time?
The Family Opportunity Mortgage helps families who are buying or refinancing homes for college students, elderly parents and disabled adult children. Without this program, these transactions would often have to be considered as “investment properties” with higher interest rates and closing costs. Now, it can essentially be treated as a primary residence.
Rhonda Porter is a Licensed Mortgage Originator MLO121324 living in the greater Seattle area. Rhonda began her career in 1986 in the title and escrow industry and began her mortgage career in 2000. She enjoys helping people understand the mortgage process and started writing The Mortgage Porter in late 2006. Read More…
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