New FHA Loan Limits are here!

Great news!  HUD has announced the new FHA loan limits for our area:

King, Snohomish and Pierce Counties

Single Family: $567,500 (up $204,710 from $362,790)

Two Family: $726,500

Three Family: $878,150

Four Family: $1,091,350

San Juan County

Single Family:  $593,750 (up $230,960 from $362,790)

Two Family:  $760,100

Three Family:  $918,800

Four Family:  $1,141,850

Kitsap County

Single Family: $475,000 (up $114,000 from $361,000)

Two Family: $608,100

Three Family: $735,050

Four Family: $913,450

Jefferson County

Single Family: $437,500 (up $105,000 from $332,500)

Two Family: $560,050

Three Family: $677,000

Four Family:  $841,350

Clark County

Single Family:  $418,750 (up $113,800 from $304,950)

Two Family: $536,050

Three Family: $648,000

Four Family:  $805,300

Clallam County

Single Family:  $383,750  (up $158,600 from $225,150)

Two Family: $491,250

Three Family:  $593,800

Four Family:  $738,000

Island County

Single Family:  $381,250 (up to $91,500 from $289,750)

Two Family:  $488,050

Three Family:  $589,950

Four Family:  $733,150

Whatcom County

Single Family:  $375,000 (up to $90,000 from $285,000)

Two Family:  $480,050

Three Family:  $580,300

Four Family:  $721,150

Skagit County

Single Family:  $373,750 (up to $89,767 from $283,983)

Two Family:  $478,450

Three Family:  $578,350

Four Family:  $718,750

Thurston County

Single Family: $361,250 (up to $86,700 from $274,550)

Two Family:  $462,450

Three Family: $559,000

Four Family:  $694,799

Kittitas County

Single Family: $328,750  (up $79,000 from $249,750)

Two Family:  $420,850

Three Family:  $508,700

Four Family:  $632,200

Chelan and Douglas Counties

Single Family:  $323,750 (up $78,200 from $245,550)

Two Family:  $414,450

Three Family:  $500,950

Four Family:  $622,600

Mason County

Single Family:  $310,000 (up $74,400 from $235,600)

Two Family: $396,850

Three Family:  $479,700

Four Family:  $596,150

Benton and Franklin Counties

Single Family:  $275,000 (up $66,085 from $208,905)

Two Family:  $352,050

Three Family:  $425,550

Four Family:  $528,850

Adams, Asotin, Columbia, Cowlitz, Ferry, Garfield, Grant, Grays Harbor, Klickitat, Lewis, Lincoln, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Wahkiakum, Walla Walla, Whitman and Yakima  Counties

Single Family:  $271,050 (up $70,890 from $200,160)

Two Family:  $347,000

Three Family:  $419,400

Four Family:  $521,250

According to the Wall Street Journal, these figures will also be our temporary conforming loan limits.

"The upper mortgage limits also will apply to loans purchased or guaranteed by government-sponsored mortgage companies Fannie Mae and Freddie Mac, FHA officials said."

More information will follow as I receive it.  Remember, these higher loan limits are only through the end of 2008.

 

Skip Two Mortgage Payments when You Refi!

Skipping

The promise of not having to write a check for your mortgage payment for two months seems so tempting that many home owners chomp on the bit when a Loan Originator dangles that bait to lure in a refi candidate.  The truth is you’re not skipping anything.

Typically when your close on a mortgage, your first mortgage payment is the following month after 30 days have passed.   So for example, if your mortgage was closing on February 22, your first mortgage payment is due on April 1.  Although it seems like you’re “skipping” a month, what’s happening here is that the mortgage interest on the new loan is prorated from the day you close.  Based on this scenario, your interest is starting on February 22 and is prorated until the 28 (or 29 in a leap year such as we have this year).  The 6 extra days of interest is charged to you at closing under the prorated interest on your HUD-1 Settlement Statement.  Mortgage payments have 30 days of interest in arrears because of this and this is why your payoff is always higher than your monthly statements by about one mortgage payment (30 days of interest).

In order to do the “Skip Two Mortgage Payments” tango, your refinance needs to close as close to the 15th of the calendar month as possible and you, dear home owner, do not make your mortgage for that month.   So using our same example, if you closed your mortgage on February 15 and do not make a mortgage payment for February, your new mortgage payment is still not due until April 1.  You will have 15 days of prorated interest due at closing (half of a mortgage payment).   Did you skip anything?  No.  You only saved writing a check.  The interest is still there and nothing is free. 

When home owners try “skipping” payments, they also risk late fees being assessed by the bank who is being paid off.  If they do not receive the payment by the 15th, the borrower will have a late fee.  Even if the escrow company wires the payoffs to the underlying lender, there’s no guarantee they will receive it in time. 

Click here for a refi rate quote for your home located in Washington.

I was helping a couple with a potential refinance and they were very interested in skipping two month’s payments.  This would have been especially costly for them as we were paying off a FHA mortgage.   FHA mortgages do not prorate the interest when they are being paid off.  It only makes sense whenever possible to close them at the end of a calendar month so that the home owner isn’t paying double interest.   If they would have closed on February 15, they would have felt like they were “skipping” however their mortgage payoff would have had interest through the end of February AND they would have paid 15 days of prorated interest on their new mortgage. 

Loan Originators who use “skip two months payments” are hoping to skip all the way to the bank.  In fact the LO who was trying to lure the couple I helped last month was charging them 3 points for the same rate that I was offering priced with 1 point.  This lender is not from Washington State and has to rely on deceptive mailers in order to get new business…I’m sure it’s because no one who has obtained from them would return or refer their friends and family to them.

There’s nothing wrong with scheduling your closing so you have the illusion of skipping two payments, just know going in what it takes to make this happen and what your risks are (late fees).

Click here for a refi rate quote for your home located in Washington.

Review Your ARM Before You Refi

There is a lot of media and mortgage hype about getting out of your dangerous adjustable rate mortgages.  Mortgage companies stand to benefit every time you refinance and the media thrives on drama.  I’m contacted often by consumers who are horrified of their adjustable rate mortgage–depending on your terms (margin and index) your ARM may be fine!

One of my clients, Scott, who I helped with a refinance almost five years ago just contacted me curious about refinancing out of his current ARM into a fixed rate.  He heard on the news that mortgage rates are low right now.   

Scott obtained a 5/1 ARM with a start rate of 3.75%.  His fixed period is over around July of this year and his caps are 5/2/5 with a 2.25 margin and the index is the 12 Month LIBOR.   His current balance is about $121,500.   

Scott expressed an interest in doing another 5/1 ARM.  He’s not sure how long he will retain this property.   Currently, I can offer the following (both refi’s have closing costs of $1900):

  • 5.25% at 1 point (APR 6.965%) with principal and interest of $717.  Should Scott decide to pay the point, it will take 3 years to break even on the cost.
  • 5.625% at 0 points (APR 7.018%) with principal and interest of $748.

He can also elect to not refinance his ARM and wait to see what the payment will adjust to in July.  He still has a few months to wait this this out, however, if his ARM were adjusting today, here is what his payment would look like:

1 Year LIBOR = 2.85% plus the margin of 2.25% = 5.10%.  Rounded to the nearest rate, the new rate for the next 12 months would be 5.125%.   Taking his current balance of $121,500 at 5.125% for 25 years (the remaining term) would create a principal payment of $719.15.  This is without refinancing or additional cost (out of pocket or equity) to Scott. 

If Scott is comfortable allowing his ARM to adjust and making his payment of $719.15 for the next 12 months, he should not refinance.   Some home owners are "up in arms" over their adjustable rate mortgages and if it’s something that’s going to cause to lose sleep, you may want to check out what your options are for refinancing out of the ARM.  Regardless of what you do, it’s crucial that you understand your mortgage, the terms and how it operates and what your options are.   

If you need help, ask your Mortgage Professional to review your Note with you.  If you need a new Mortgage Professional because they’ve either left the business or have forgotten about you, I’m happy to adopt your Washington State mortgage.

My Valentines Post on Commitment

Valentine

Just in time for Valentines Day, I thought I would revisit a word that used to horrify my husband before we married a couple years ago (on April Fools): commitment.   I’m thinking about this because I received this comment from a potential client, it’s a common one and I appreciate their honesty:

"I would like to go ahead with preapproval if it does not cost anything and does not bind me in any way to anything….How long can I shop after getting preapproved?"

There are many issues that this brings up.  My response to this home buyer in a chocolate covered nut-shell (you got to have chocolate on Valentines) is that I’m happy to provide a prequalification without obligation.  However, I will not do a preapproval at this stage in our relationship.   Here’s why:

  • A true preapproval involves more than just my efforts and time, which alone are valuable and limited.  With a preapproval, I may also be involving the time of my Processor and Underwriter. 
  • Back to my time:  I have to prioritize which clients I’m working with in any given day.  My first priority is to bona fide transactions.  I must take care of those who have committed to working with me first.  Especially in our current market.
  • Preapprovals also involve more costs.  There is a fee to underwriting and credit (minimal for credit).
  • Lenders are relying on our commitments as originators when we submit loans to them.  Having a higher "fall out" from clients who do not close a transaction jeopardizes our relationships with those lenders.  One lender I work with tracks "fall out" and charges a slight fee (0.05 bps) when our fall out ratio is too high.

Other Loan Originators may be perfectly happy to issue a preapproval letter to people who are not ready to commit to a Mortgage Professional.  The preapproval letter may or may not be legitimate.   

As a home buyer, would you rather work with a Loan Originator who is chasing ever rate shopper (which is a lot of work) or a Mortgage Professional who is committed to you, your transaction and sticking around for you after closing by continuing to keep you informed of news that may impact your mortgage?

Related PostWhen Are You Obligated to a Loan Originator?

My Favorite Valentine’s Post: There’s No Love for the Subprime Borrower

New Mortgage Porter Feature: Weekly Tips

Are you considering buying a home or refinancing in the future?  You can now sign up to receive weekly email tips on home buying, preparing to refinance and credit scoring.  Simply click on the links I’ve provided on the left side of Mortgage Porter under the green Mortgage Weekly box at Favorite Links. 

It’s simple, free and I won’t hound you (unless you want me to)!   

My Interview with Seattle Sweet Digs

Earlier this week, Katrina Munsell of Redfin’s Blog, Seattle Sweet Digs interviewed me regarding whether or not it’s time to refinance your home.   Her questions are quite timely as we’re waiting for the Senate to vote on the stimulus package which includes raising the conforming loan limits and many folks are not totally certain of when refinancing makes sense.   You can read the interview by clicking here.

Join the Mortgage Porter Rate Watch

UPDATE:  Sadly the service that I used to provide this (Mortgage Coach) no longer offers this program. HOWEVER, Mortgage Master Service Corporation has added a new program which watch mortgage rates and email an alert once we have reached your target rate.  I still adopt mortgages and help Washington home owners with refinances…I’m just not able to provide the report. 

A few months ago, I wrote about adopting mortgages for borrowers who have adjustable rate mortgages and who do not have a Mortgage Professional to assist them.  If you have not heard from your Loan Originator since your transaction closed, or even within the last few months, they either

  1. Are no longer in the mortgage industry originating mortgages, or
  2. Do not have a “post closing” system designed to help home owners stay informed about their mortgage, and
  3. Only care about originating and not what happens to borrowers afterwards.

Perhaps your Loan Originator has you on their mailing and email list and you’re just not that impressed with the level of service they offered you…you want to make a move.

Consider having your mortgage adopted by a Mortgage Professional you trust.  I personally enjoy adopting mortgages for Washington State families.   It’s a FREE service and more often than not, the current rate is fine for the family (no refinance is required).   At least the home owner knows that they have a Mortgage Professional who is watching out for them.   Refinancing a mortgage, when it makes sense, can save hundreds of dollars each month that can either be invested into savings, used to pay off debts or applied towards the principal of the new mortgage to shorten the term and reduce interest.  Bottom line, it saves home owners money and if the home owner is going to retain the mortgage long enough to break even, it’s almost crazy not to do it.   (It’s also crazy to refinance when their is no financial benefit).

I can tell many home owners do not have relationships with their loan originators because of the amount of rate quote request I receive from all over the country.  Currently, I can only help people with mortgages in Washington State (if you’re outside of Washington, I’m happy to refer you to fellow Mortgage Professionals).   

If you would like me to adopt your mortgage and add you to my rate watch, send me the following information:

  • Your Full Legal Name(s)
  • Property address
  • Estimated value of the property
  • Current mortgage balance(s)
  • Estimated credit score
  • Your email address/phone number (email is an excellent way for me to send a rate alert should mortgage interest rates drop)
  • How long you plan on keeping the property
  • Do you have taxes and insurance included in your mortgage payment

I will review your mortgage and send you a Personalized Mortgage Plan includGetthumbnailcak0vwpfing a  Total Cost Analysis which compares your existing mortgage to 3 other mortgage scenarios.   I just emailed one to a homeowner in Snoqualmie this morning showing him that he should not refinance at this time.

Again, there is no cost to you and no refinance required.  I’m happy to adopt your mortgage!

Should You Refi?

EDITORS NOTE: This post was written back in 2008 and mortgage rates have obviously changed 🙂  If you would like a mortgage rate quote based on current rates for your home located in Washington state, click here.

Last week I did a quick alert on the 30 year fixed hitting high 4’s-low 5s and I received an excellent comment from Sandy:

“…With all the costs and everything of refinancing, how much lower do rates need to be than what you currently have, before it makes sense to think about refinancing? I am just curious, as we have a 30yr fixed loan that is in the low 5s.”

You would think this is a simple question with a simple answer.  There’s much more to it.  Here are some things to consider if you considering refinancing your mortgage:

How long do you plan on staying in your home?   There are cost to the mortgage even if you’re getting a “no cost mortgage” where the hard costs are actually financed into the interest rate.   If you cannot break even on the cost before you plan on selling or refinancing again (low 4’s to high 5’s would be unlikely), then refinancing for the purpose of reducing your rate may not make sense.

Do you have an Adjustable Rate Mortgage?  If you’re going to retain your property longer than the remaining fixed term on the ARM (adjustable rate mortgage), you may want to consider refinancing into a fixed mortgage.

Do you have private mortgage insurance or a second mortgage?   Sometimes if someone has pmi or a piggy back second mortgage, refinancing may make sense if the can restructure the existing mortgages into one and if the blended rate of their existing mortgages are higher than what the new mortgage would provide.

Do you have a Jumbo mortgage?  Depending on what your mortgage balance is and your current rate, it may make sense to restructure your mortgage into a conforming mortgage.  This can be done by paying down the mortgage at closing or using a second mortgage, such as a HELOC or fixed second.

Would you like access to your home equity?   Refinancing can provide cash for home improvements, college tuition, debt consolidation, or what ever else you wish to do with your equity.   Most cash out refinances are priced higher than a rate term refinance.

Are you getting a divorce or separation?  If you have a mortgage with another person and the relationship is dissolving; you will need to refinance in order to remove the one who’s not staying in the home from the mortgage.   Divorce decrees and Quit Claim Deeds do not remove someone’s liability from the mortgage.  Plus, it’s a huge risk for the person who is no longer staying in the home.   Refinancing to remove an ex-spouse from the mortgage and to cash out their equity is not priced as a “cash out” refinance–it’s treated as a rate term refi.

Are you concerned about your home value declining?  Refinances are priced based on loan to value and there are underwriting guidelines that limit how high a loan to value may be.  In “declining markets” lenders have additional restrictions on loan to value lending limits.

Here are some quick “Do’s and Don’ts” for your refinance:

  • Do get a good faith estimate from your Mortgage Professional.  If you have not heard from your Mortgage Professional since you closed your loan or over the past few months, you might need a new one (they could be out of the business).
  • Do not rely on a simple “rate quote” without knowing the costs involved.
  • Do complete a loan application and provide the information your Mortgage Professional needs to lock in your interest rate.
  • Do not try to “play the market” and get the lowest rate…it’s far too volatile in this climate.   If the rate makes sense, lock it!

Must reads:

Picking your next mortgage by rate shopping?   You might as well be playing liars poker.

I’m happy to adopt your ARM.  No refi required.