Helping Washington State homeowners learn more about their mortgage options.
Just a friendly reminder that tomorrow you can should vote in Washington State’s Top 2 Primary.
This election will determine which two candidates will advance to the November General Election.
So vote…and vote often!
For more information, click here.
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.
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:
With the passing of HR 3221, Down Payment Assistance Programs will no longer be allowed with FHA mortgages as of October 1, 2008. DPA’s such as Nehemiah, have been popular for helping home buyers come up with their down payment. FHA allows Sellers to pay for closing costs and prepaids as long as the buyer has met their minimum required investment (which has also changed with the passing of HR 3221–another post will follow on this subject). With DPAs, the seller contributes funds to the DPA (like Nehemiah) which is a "charity" (they collect a small fee from the seller which is used for charitable causes). The DPA then contributes the funds towards the down payment for the buyer.
Section 2113 of HR 3221 states that down payments for FHA insured mortgages may not come from "the seller or any other person or entity that financially benefits from the transaction" or "any third party or entity that is reimbursed directly or indirectly". This applies for new loan applications on or after October 1, 2008.
Family members can still contribute towards the down payment on FHA insured mortgages. In fact, Section 2113 of HR 3221 allows family members to loan up to "100% of the appraised value of the property plus any initial service charges, appraisal, inspection and other fees in connection with the mortgage". The borrower must qualify for both mortgage payments (the first mortgage-FHA insured at 96.5% of the appraised value and the second mortgage from the Bank of Mom and Dad for the remainder). This may make family members more comfortable with helping out with down payments as it will not be treated as a gift and the loan is documented, terms would be clear and recorded as well as secured against the property as collateral. (Hopefully the Bank of Mom and Dad never have to foreclose).
What does this mean to you?
If you’re considering buying a home with minimum down payment, your family can gift or finance the 3.5% required investment of the buyer for FHA insured financing. However, if you’re family not in the position to do so or if you don’t want to ask the Bank of Mom and Dad, then you have limited time to take advantage of the Down Payment Assistance Programs.
If you’re hoping to use a down payment assistance program to purchase your next home, you have just over a month to do so. Meet as soon as possible with a qualified Mortgage Professional who can help you become preapproved with an FHA insured mortgage (NOTE: not all lenders are approved to do FHA loans). You must be credit approved prior to October 1, 2008 (and the closer we approach that date, the busier FHA approved lenders will be trying to beat the deadline).
Of course, DPAs are going down kicking and screaming to stay alive. At this point, the countdown to the demise of DPAs is clicking away.
Update: 9:30 am August 11, 2008. I’ve just received notice from one of the banks that we work with are no longer allowing DPAs. This serves as a good reminder that lenders may have their guidelines that overlay government requirements.
Related posts on HR 3221:
Update February 17, 2009: The American Recovery and Reinvestment Act has modified this tax credit posted here. If you're a first time home buyer who purchased January 1, 2009 – December 31, 2009; click here. If you purchased from April 9, 2008 – December 31, 2008; this post still applies to you.
Please check with your CPA or tax advisor to see how this impacts you.
With the recent passage of HR 3221, people who have not owned a home for the last
3 years may qualify for an interest free loan from Uncle Sam of up to $7,500. Here's a quick skinny on how this works:
First time home buyers may receive a tax credit of up to 10% of the purchase price of the home (not to exceed $7500). This is a "tax credit" meaning that you receive the credit (if you want it) after you file your income taxes. For example, this means that when you file your taxes in 2009 and you owe $5,000 to Uncle Sam and you qualify to have a tax credit in the amount of $7,500; you would receive a refund of $2,500. However, this is a refundable credit (aka interest free loan) that must be paid back each year to the IRS (when you file your taxes) over the next 15 years.
If you sell your home before the tax credit is repaid to Uncle Sam, then the full amount is due or if your property that you received the tax credit for is no longer your primary residence (i.e. you convert your home to a rental).
This credit does not apply if the first time home buyer is buying a home from a relative.
This tax credit is only available for purchases made between April 9, 2008 and July 1, 2009 for adjusted gross incomes of up to $75,000 ($150,000, if married, filed jointly) and phases out up to $95,000 ($170,000, if married, filed jointly).
Should you take advantage of this opportunity?
Sure! Who wouldn't want a $7,500 interest free loan? Two things I would consider using this credit for if I were a first time home buyer:
Just understand that this is essentially an interest free loan. This is not "down payment assistance". You will be paying this back over the next 15 years (or sooner if you sell, rent out the property or convert it a second home)…but you just can't beat "interest free".
For more information, click here.
Friendly reminder: I am not a tax professional, I am a Mortgage Planner assisting families who need mortgages in beautiful Washington State. Always consult with your CPA, financial or tax advisor.
Watch for more posts on the effects of HR 3221.
Last week, in San Francisco at RE Bar Camp, the attendees were surprised with their very own super hero trading cards. Somehow, my trading card didn’t make the order with the other "super bloggers" (which is easy to understand since this huge feat was pulled off in just a couple days before the event). A huge thank you goes to Gia Freer, VP and Community Manager of RealSeekr (aka Principessa di Proprieta) for creating my super hero trading card!
On a much more serious note, please check out my article on Rain City Guide about The Housing Rescue Bill which was signed off by President Bush yesterday.
I was just part of the latest 4realz Roundtable hosted by Dustin Luther and featuring Jonathan J. Miller, an appraiser from New York. This discussion is about the upcoming changes with how conforming appraisals will be ordered, which I wrote about earlier this year at Rain City Guide. I was planning to be a fly on the wall…but Dustin wouldn’t have that! Jessie B. from Retro.com was also active on the panel.
This will impact any conforming (Fannie/Freddie) mortgage and I really don’t see ANY benefit to this new procedure that is scheduled to begin on January 1, 2009. If this goes into effect, appraisals will be ordered from an "appraisal management company" instead of from a mortgage broker/loan originator. It’s my understanding that even though this change has come about from NY’s Attorney General Coumo suing Washington Mutual and eAppraisal, banks like WaMU will not be impacted. (Am I the only one who finds this ironic?).
My take on this is that appraisals will take longer and will have less quality if they are ordered via a pool (very similar to VA appraisals).
Listen and learn! Just click the green arrow above.
On Wednesday, July 2, 2008 at Renton City Hall from 1:30 – 3:30 p.m., there will be a Rulemaking Meeting regarding SHB 2770’s Disclosure Form. This is a form that’s required to be provided from certain loan originators prior to a consumer completing a loan application effective June 12, 2008. If you think a loan package for an application all ready wastes a tree, you can expect more paperwork and disclosure forms on top disclosure forms thanks to our elected officials who just want to make sure you really do understand your mortgage (hint, if you don’t understand your mortgage…you probably need to be working with a different mortgage originator).
Click here to see DFI’s sample form.
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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