How to Buy an Investment Property with a 10 Percent Down Payment with no PMI: Fannie Mae Homepath Mortgage

April 26, 2011 by 1 Comment

HomepathEDITORS 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.

Seattle area investors are taking advantage of current lower home prices and are buying rental properties.  One of the issues with investment property is that it often requires a larger down payment and more stringent underwriting guidelines.  However, if you buy a qualified property that is owned by Fannie Mae, the Homepath guidelines will allow as little as 10% down for an investment property with NO private mortgage insurance and NO appraisal.

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Filed Under: Fannie, Freddie and FHFA, Homepath, Investment Property, Residential Purchase Tagged With: ,

Fannie Mae Homepath Mortgage Incentives are BACK!

April 15, 2011 by Leave a Comment

NOTE:  This program has been extended through October 31, 2011.

Fannie Mae is trying to sweeten the pot for buyers to considering using a Fannie Mae Homepath Mortgage for purchasing a foreclosed home that is now owned by Fannie Mae by offering 3.5% in closing costs on eligible transactions that close by June 30, 2011.

Here are some details for qualifying for the Fannie's Homepath Mortgage special (from the Homepath website):

  • Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.
  • The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.
  • The sale must close on or before June 30, 2011. No exceptions will be made to this deadline.
  • Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.
  • Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
  • If a buyer's total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.

Don't forget, the Fannie Mae Homepath Mortgage does not require an appraisal and there is no private mortgage insurance for credit scores over 660.   Fannie Mae will lend up to the high balance conforming loan limit, which is currently $567,500 in the greater Seattle area.   For more information, click here.

NOTE:  If you're considering a Fannie Mae HomePath Mortgage…I recommend checking out FHA rates which are currently lower, offers down payments as low as 3.5% and the mortgages are assumable.  It never hurts to compare your options!

If you have questions or would like a rate quote for a home located anywhere in Washington, please contact me!

Filed Under: Fannie, Freddie and FHFA, Homepath, Residential Purchase

How to Select Your Mortgage Originator

March 25, 2011 by 1 Comment

I’m working with a West Seattle couple who are getting ready to buy their first home.  This is something that is not unusual for me to hear:

“Our real estate agent was wanting us to contact a few lenders and have them all pull GFEs on the same day with the same perameters so we can choose who to go with. Then whoever has the best rates/lowest fees we were planning to have pull our credit…”

The real estate agent has good intentions, however this may not be the best advice for how to select a mortgage originator.   First of all, this couple may find it difficult to estract a good faith estimate from a mortgage originator without being in contract.  This is due to HUD’s [flawed] regulation that if a LO issues a GFE without a property address, once the buyers actually have a contract, the bona fide address of their new home will not constitute a “changed circumstance”.

It is solid advice that if you’re going to shop lenders, do so at the same time with the same perameters–just don’t expect a good faith estimate.  DO get something in writing from the lender (it may go by many different names, including “rate quote” or “worksheet”, etc).

In addition to rates and fees, here are some other suggestions I think one should consider when selecting the professional who will be helping them obtain the financing of their home:

How long have you been a mortgage originator?  I began originating mortgages on April 1, 2000.  Prior to that, I was in the title and escrow business for 14 years.

What type of mortgage company/institution do you work for?  Most will say bank, correspondent lender (some LO’s will call themselves “mortgage bankers”), mortgage broker or credit union.  Each type of company offers unique advantages or disadvantages.  Mortgage Master Service Corporation is a correspondent lender.

What type of programs does your company offer?  We offer FHA, VA, USDA, Conventional, Jumbo (non-confoming mortgages).   If you’re considering a certain program, such as FHA, ask the LO how long they’ve been originating that specific type of program.

Where are your loans physically underwritten?  I’ve worked with our same underwriters for over 10 years at our main office in Kent since 2000. 

Are you NMLS Licensed or Registered?  There are differences between what each type of LO is required per the SAFE Act between Licensed and Registered LOs.  LO’s who work for a bank or credit union will try to tell you that they’ve been adhering to the SAFE Act…only Washington Licensed LO’s are regulated by DFI and have a license to lose.  There is more required of LO’s who are licensed per the SAFE Act than those who are registered.  I’m NMLS Licensed and have been licensed since 2007 (when state licensing started).

I also recommend “googling” your mortgage originator.  It’s totally my opinion, and perhaps a bit biased, that if your mortgage originator blogs or has a social media profile, their reputation is gold to them.  They tend to be more transparent and current on ever-changing guidelines IF they are writing their own content.   Google me!

Filed Under: Real Estate Agents, Residential Purchase

Which Fees Can Change on a Rate Quote Worksheet

March 4, 2011 by Leave a Comment

When a home buyer is shopping for their next home, they often request written rate quotes from mortgage originators to see a detailed list of closing costs and an estimated total monthly mortgage payment.  Before HUD mandated their Good Faith Estimate in 2010, they could rely on a Good Faith Estimate.  Due to the liability a mortgage originator may incur on issuing a GFE before the buyer has a purchase and sales agreement (in contract to buy a home), a buyer would be hard pressed to find a mortgage originator is allowed to issue a GFE pre-contract.  In addition, HUD's GFE does not include the total mortgage payment nor funds required to close the transaction, so it's not best tool for a buyer. 

In lieu of issuing the Good Faith Estimate, mortgage originators can issue a written "rate quote worksheet" which may have different names by different lenders.  Just like the old GFE, the rate quote worksheets also vary in appearance from lender to lender as they had to be created by lenders as a result of the limitations of the HUD's GFE…they are not a standardized document.    The written rate quote worksheet should contain all the same information as the good faith estimate did prior to HUD's 2010 GFE as well as the APR.

The rate quote worksheet is simply a tool to provide an estimate of closing costs as well as what current rates are available if the home buyer were locking at that moment. 

Some fees on the quote can change, including:

Title Insurance and Escrow.  There are several title insurance companies located within each county.  Home buyers DO have the ability to select their title and escrow providerand some offer discounts when you use title and escrow from the same company.  They may discover that their real estate agents try to control who provides this service.   Often times, listings have a title committment prepared by the listing agents preferred title vendor (sometimes called a "TBD").  Until the mortgage originator knows who the title and escrow company are, this fee is an estimate and the fees do vary.

Property taxes.  Property taxes are in the mortgage payment as well as the prepaids/reserves section of the mortgage quote.  The number of months required to collect for reserves may varies based on when the first month's payment is due…so until there is an established closing date, it's a "best estimate".  NOTE:  I use 1.25% of the sales price divided by 12 months, unless I am provided a different figure to use for taxes.  Property taxes are specific to the property that is purchased…and property taxes may change over the years (impacting your mortgage payment).  

Home owners insurance.  Home owners insurance is in the payment as well as the prepaids/reserves.  This fee can vary based on who the provider is (selected by the home buyer) and the amount/type of coverage they request.

Prepaid interest.  This will be based on the very date of closing, paying interest through the end of the month (because you now own the home and have a mortgage).  Until we have that contract, most lenders will use 15 days of interest for purposes of a rate quote.  Closing earlier in the month increases the days of interest and later in the month reduces the days of interest.

Of course, how the loan is priced once the rate is locked (with or without discount points) may also change as the home buyer may not decide this until they know the what pricing (what rate at what cost) is actually available until the moment they are able to "lock".

This post was written based on a question from a home buyer I'm working with in the Seattle area.  If you have a question regarding mortgages that I can answer on Mortgage Porter, contact me!  You just might read your answer on my blog.

Filed Under: Good Faith Estimate, Residential Purchase

Reader Question: Converting Current Home to Rental

November 17, 2010 by Leave a Comment

I enjoy receiving email like this from my readers:

I currently own a condo as my primary residence and am getting married soon.  The mortgage and title is in my name only.  We will soon like to look at moving to a bigger place and would apply for a mortgage on our new primary residence together while still keeping the condo to rent out.  How will this situation affect getting approved for the new loan?  Are there any changes that will need to be made to my current condo mortgage since it will no longer be my primary residence?  Thanks in advance for your help! 

Unless you're planning on refinancing your existing condo, there shouldn't be any changes that you need to make that mortgage because you are renting it out.  If you are currently refinancing or planning to refinance the condo, you should let your mortgage originator know of your intentions to use the property as an investment property.  On a side note, you may also want to check with your Home Owners Association or condominium bylaws to make sure that investment properties are allowed.

Qualifying for the new home will be impacted by the type of financing you select and the amount of home equity you have currently in the condo.  If you have less than 30% home equity, you'll need 6 months reserves for all of your mortgages (your current residence/future rental and the new home) if you're considering conventional financing or you must qualify with both mortgage payments.  FHA does not have this guideline at this time. 

In addition, if you do not have a documented current two year history as a landlord, you may find that the entire mortgage payment (including the home owners association fees) may be factored into your debt with no credit for any rental income you receive on the new home.

Lenders are looking for extra reserves and making sure that people who are leaving their current homes have enough "skin in the game" (equity) so that they're less likely to walk away from their former residence once they've closed on their new home.

By the way, if the home you're buying with your future bride is located in Washington state, I'm happy to help you with your mortgage!

 

Filed Under: Condos, Investment Property, Residential Purchase

Buying a Condo or Townhome?

November 12, 2010 by 1 Comment

iStock_000061440694_MediumCondos come in many forms including high-rises, converted apartment buildings and even some town-homes may be condominiums depending on how they are legally described.  If you’re planning on buying a condo and not paying cash for your purchase, here are a few things to look out for where lenders may have an issue with.

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Filed Under: Condos, FHA, Residential Purchase Tagged With: , , ,

The Mortgage Process: Contemplating Buying a Home to Getting Preapproved

November 9, 2010 by Leave a Comment

For a while now, I’ve had this idea floating around in my head that with four years of articles at Mortgage Porter, I really should organize the post by the actual mortgage process.  Right now, my blog is traditionally organized chronologically and by categories.  I’m not changing that at all…what I am planning on doing is reposting the articles I most commonly refer to for my clients in an order that follows the mortgage process.  This will be a post I will continue to update with new content via links to the article…it’s a work in progress!  

In my opinion, someone considering buying a home should start researching the process months before actually entering into a purchase and sales agreement.  So that’s where we’ll start:

Considering Buying a Home?

Getting on Track to Buy Your Home

Basic Tips for Homebuyers

How Much Home Can I Afford?

That new car with cost you!

Tips for Improving Your Credit Score

Game Plan for if your credit score is low.

Getting Preapproved

Are You Really Preapproved or just Prequalified?

Debt to Income Ratios (aka DTI)

Do I Really Have to Provide All Pages of My Bank Statements?

What is required to document income?

Documentation for Self Employed or Commissioned Paid Borrowers

Why it pays to get preapproved early:  You may think you know your credit score

Preapproval Letters Defined

What should a preapproval letter contain?

Relocating to Washington State and getting preapproved for a mortgage

Is my Preapproval Letter Still Valid wth all the Rate Changes?

Planning Your Funds for Closing

Funds for closing when you’re buying a home

How much do I need for a down payment?

Gifts from Parents:  FHA and Conventional

We’ve just started the process with this post addressing considering buying a home to getting preapproved!  Watch for future post where I’ll organize articles I’ve written on being in a transaction.

Filed Under: Residential Purchase, The Mortgage Process Tagged With: , , , ,

Buying a Home with Owner Occupied Financing After Refinancing Your Home as Owner Occupied

October 28, 2010 by 13 Comments

I’m seeing a trend where home owners are refinancing their current home as “owner occupied” and then weeks after closing, try buying another home as “owner occupied”.  You cannot have two owner occupied homes.   It’s really that simple. 

I’ve had a couple of surprised people contact me who thought they could buy a home just following a refinance only to learn by their mortgage originator that they have to finance the new home as an investment property.   Financing an investment property not only offers a slightly higher interest rate than a mortgage for a primary residence, it also has tougher guidelines with higher down payment requirements and greater reserves (savings).  

If you are considering refinancing your primary residence and possibly buying another home, you should discuss this with your mortgage originator as soon as possible.  You will be signing a deed of trust which has language that you intend to occupy that home for 12 months.  Some folks might feel that the “intending to occupy” means that they can refinance as owner occupied and a couple months later buy “owner occupied” and odds are, they will be caught.  It may be purely unintended for this to happen, but be prepared for the possibility the new purchase to be treated as an investment property, even if you’re going to live there. 

If you’re considering taking advantage of the lower home prices and lower rates, you may want to delay your refinance of your current “primary residence” or talk to your mortgage originator about refinancing your current home as an investment property.  Your next purchase might qualify as a second home, however the property typically needs to be about 50 miles away from your primary residence (the one you just refinanced) and it is the underwriter’s call on whether or not the second home “makes sense”…this can be a real grey area.  

Life happens and we know plans change. Be upfront with your mortgage professional if you’re thinking about buying a home.  You may want to ask them to verify with your personal scenario with an underwriter.  Finding yourself in the middle of a transaction to buy your next home and having it declined as owner occupied can be an expensive experience.

Related post:

Is it a Primary Residence, Second Home or Investment Property

Can I Convert My Existing Home to an Investment Property to Buy My Next Home?

Filed Under: Investment Property, Refinance, Residential Purchase Tagged With: , , , ,
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