Searching for your Dream Home? Consider a Renovation Mortgage.

If you have been finding the current lack of inventory a challenge, you may want to consider a renovation mortgage. A renovation mortgage (or rehab loan) allows you to finance improvements to the property beyond the sales price of the home. The renovations begin after closing and there are no restrictions on the types of improvements. You can even use this on your existing home as a refinance if you love your location and neighbors and just want to make changes to your home. [Read more…]

New Mortgage Programs!

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Waiting for the Jumbo Shoe to Drop

The Government has reached out to home owners who have conforming or FHAMortgageporterjumbo financing.  However if your mortgage is a jumbo (aka non-conforming); your options for refinancing are few…there is no HARP for you.   Many home buyers used various types of mortgages to buy their dream or "move-up" homes a few years back during the loosey goosey days of mortgages and now are either dealing with or waiting for these large mortgages to adjust.

Recently I've added Jumbo mortgages back to my Friday rate quotes, including fixed and a couple of adjustable rates mortgages.  The difference now is that people must actually qualify for their mortgage.  No more stated income or qualifying at a teaser low interest only payment.  And as I mentioned, there is no assistance for you unless your mortgage servicer is willing to do a modification.

As Diana Olick's video above addresses, banks have a large "bucket" of mortgages that are getting ready to go into foreclosure.  Many are jumbos.   Even if Obama's programs for loan modifications and refinances reached out to the high end home owner in need of a lower mortgage payment; if the home owner has lost their job, odds are against them.

The timing of no available mortgages for the high-end home owner couldn't be worse.   For the past few years, the pricing was not attractive for jumbos.  Someone with an option ARM, for example, would not want to nor probably qualify for the much higher rates if they wanted a more secure fixed rate product.   This also prevents the jumbo home owner from being able to sell their home should they decide they can no longer afford it.   Their home's potential prospects are limited to those with significant cash down payment to have a "high balance" loan limit (currently in the Seattle area, the 2009 high balance loan limit is $567,500). 

The Seattle-Bellevue area also has a significant amount of high end homes.  How many are waiting to go into foreclosure?   This is one sector of the market who odds are will not see a bail out.

Can I buy a $620,000 home with a low credit score?

This morning I received this email:
My wife and I found a house we are in love with. I wanted to write and tell you our situation, maybe you can tell us if we are even in the "ballpark".    The house we like is 620,000. We have 20% to put down. We have very little debt and well documented income. I have a low credit score, 660 or lower. Is this worth pursuing or is the credit score too low?
Based on current guidelines/pricing, you really need to have your credit scores above 660 if you’re considering loan amounts above "true conforming" (presently $417,000). It’s very possible that this couple can buy a home utilizing an FHA jumbo mortgage which leans more towards credit history rather than credit score.  Here are some factors that would indicate whether or not this is a possibility for this couple:
  • Credit history.
  • Loan limits.

Unfortunately the loan limits where this couple are considering to purchase are much lower than what we have in the King County area.  They’re wanting to buy in Clark County which currently has a temporary jumbo limit of $418,750.   They would need about $200,000 for their down payment with the seller paying closing costs and prepaids (est. at $12,000).   Or they could opt for conforming financing with a loan amount of $417,000 and try to get a conventional approval (with a larger down payment, it’s possible).

If they were buying in King, Pierce or  Snohomish County, the loan limit is currently $567,500 and would have the option of putting less than 20% down (as low as 3.5%), should they wish assuming they qualify for the payment.

Regardless of where the property is located, the last 12 months of credit history is more critical than credit score (as long as the credit scores are 600 or higher) for a purchase using an FHA insured loan.

FHA loans are full doc and will need to be sourced and seasoned.  Buyers should be prepared to provide their last 2 years of W2s (and possibly tax returns) as well as at least 30 days of income on their paystubs.

Remember, we should be learning in early November what the new jumbo loan limits will be.  I’ll keep you posted!

How Will the New Jumbo Limits Impact You?

If you’re buying a home $520,000 or below over the next year, you won’t really be impacted by the reduced FHA Jumbo and Conforming Jumbo limits.   However, if you’re considering buying a home with minimum down, you’re losing $45,000 of financing power on January 1, 2008 with a $522,100 loan limit.

I wrote an article at Rain City Guide in June about how much home $17,550 can buy you in King, Pierce and Snohomish County with the current loan limit of $567,500.  The answer: $585,000 utilizing a FHA Jumbo.   Once the new loan limit is in place for our region, the most you can buy with minimum down will be closer to $540,000.   Although the new minimum required investment at 3.5% (effective October 1, 2008) will increase the amount required to $18,900 (based on a $540,000 sales price).

Want to do conventional 20% down and stay away the "true jumbo" rates by utilizing the maximum conforming jumbo?  Currently, a sales price (or appraised value in the case of a refinance) of $709,000 will get you pretty close to the existing limit at $567,200.  As of January 1, 2009, that sales price (or appraised value) is reduced to $652,500 for a loan amount of $522,000.

Refinances may also be impacted depending on what the payoffs are on the existing balances and if it’s classified as a "cash out" refinance (second mortgages not obtained from when you purchased your home is considered cash out) which have tougher guidelines than a "rate term" refinance.  Underwriting guidelines continue to tighten and will continue as well.

As always, I highly recommend that if you are considering buying or refinancing in the next year, to contact a local Mortgage Professional at your earliest convenience.   The loan limits may not even impact you, it’s never to early to prepare considering our current climate. 

FHA Minimum Down Payment Increasing January 1, 2009

With the passage of HR 3221, the minimum required investment of a home buyer utilizing a FHA insured mortgage is increasing from roughly 3% to 3.5% effective January 1, 2009.  You may think this sounds like small change, but with larger loan amounts, this adds up.

For example, if a home buyer is utilizing a FHA Jumbo and they are buying a home priced at $500,000.   Their current minimum required down payment of 3% is $15,000.  Effective January 1, 2009, the minimum required down payment of 3.5% is $17,500; a difference of $2,500 for the amount required to invest into the transaction.   With a home priced at $300,000; the current required investment from the buyer would be $9,000.  As of January 1, 2009, the new amount required will be $10,500.

What does this mean to you?

If you are planning to buy a home utilizing a FHA insured mortgage, be aware of the changes to the minimum down payment requirements.   After December 31, 2008, you'll be required to come up with additional funds towards your down payment which may be a gift or loan from family members.

If you are wanting to take advantage of the lower down payment requirement, meet with a Mortgage Professional who is qualified to provide FHA loans (not all loan originators are, you can check HUD's site to verify).

If you would like me to provide la rate quote for a FHA mortgage on a home located anywhere in Washington, please click here.

Editors Note: this post wass been modified to correct the effective date.

Conforming/FHA Jumbo Limit to Decrease January 1, 2009

November 7, 2008 Update: FHFA has announced the new conforming jumbo loan limits for 2009 which are based on a lower median home price than used here (which was 2008’s limits).  Based on these figures, a single family unit will be $506,000 for King, Pierce and Snohomish Counties.  Read more here.

Recent legislation, HR 3221 included what the new conforming loan limits will be.  Our conforming-jumbo limits will be rolled back slightly to the following effective for all mortgage loans not closed December 31, 2008.   Here’s what the new limits will be effective January 1, 2009 (based on HUD’s current median home prices at the time of this post):

King, Pierce and Snohomish Counties:

Single Family:  $506,000 $522,100 ($567,500 until 12/31/2008)

Two Family:  $668,350 ($726,500 until 12/31/2008)

Three Family: $807,850 ($878,150 until 12/31/2008)

Four Family: $1,004,000 ($1,091,350 until 12/31/2008)

Kitsap County:

Single Family:  $437,000 ($475,000 until 12/31/2008)

Two Family:  $559,450 ($608,100 until 12/31/2008)

Three Family:  $676,250 ($735,050 until 12/31/2008)

Four Family:  $840,350 ($913,450 until 12/31/2008)

San Juan County:

Single Family:  $546,250 ($593,750 until 12/31/2008)

Two Family:  $699,250 ($760,100 until 12/31/2008)

Three Family:  $845,250 ($918,800 until 12/31/2008)

Four Family: $1,050,500 ($1,141,850 until 12/31/2008)

Clark and Skamania Counties:

Single Family: $417,000 ($418,750 until 12/31/2008)

Two Family:  $533,850 ($536,050 until 12/31/2008)

Three Family:  $645,300 ($648,000 until 12/31/2008)

Four Family:  $801,950 ($805,300 until 12/31/2008)

Jefferson County:

Single Family:  $417,000 ($437,500 until 12/31/2008)

Two Family:  $533,850 ($560,050 until 12/31/2008)

Three Family:  $645,300 ($677,000 until 12/31/2008)

Four Family:  $801,950 ($841,350 until 12/31/2008)

Watch for my follow up post on what this means to you.

Read my related articles on HR 3221:

First Time Home Buyers Tax Credit

Down Payment Assistance Programs Days are Numbered

How Much Home Can You Buy with $17,550 Down

I’m taking a brief blogging break.  This is a reprint from Rain City Guide.  To read the original post and 100 plus comments, click here.

My purpose for this post is to hit it home what a great window of opportunity we have with FHA Jumbo windowmortgages which are only around until December 31, 2008 unless Congress passes an extension of some sort (which is a possibility-but not guaranteed).

For the remainder of this year, you can use $17,550 to buy a home priced at $585,000 using FHA Jumbo with 3% down.    FHA requires the buyer to invest 3% into the transaction (which can be a qualified gift).  3% of $585,000 = $17,550.  (With roughly 5% down, utilizing FHA Jumbo, you can puchase a home for $600,000).  The Seller can contribute up to 6% towards closing costs and prepaids as long as the buyers 3% required investment is met.  With this scenario, the Seller is contributing around $14,000.   The loan amount is just under the maximum allowed FHA Jumbo for King, Snohomish and Pierce County of $567,500.   

With FHA there are no income limitations and much easier on credit scoring than conventional mortgages which ding you if your score is 719 or lower.   Effective January 1, 2008 2009 (as things currently stand) the FHA loan limit will be reduced to their actual loan limit of $362,790 for King, Snohomish and Pierce Counties. 

Of course, you’re not limited to FHA if you only have around $17,550.  There’s also Fannie Mae Flex (someone please knock on wood fast before Fannie shelves decides to put this product on the shelf) which allows lower down payment–currently as low as 97%.  However the highest loan amount allowed is the true conforming of $417,000.   Utilizing a Fannie Flex program, you could purchase a home priced around $434,000 with the seller contributing about $12,000 towards your closing costs and prepaids.

So we’re talking $585,000 sales price using FHA Jumbo (while supplies last!) or $434,000 with Fannie Flex97 (while this product is still available) if you have $17,550 for a down payment.   Can you see why I’m so crazy about FHA Jumbo?  This is a window of opportunity for those who qualify for the payment but may be shy on the down payment that’s scheduled to close on December 31, 2008