New Conforming Loan Limit Won’t Help Refi’s w/2nds…FHA May Save the Day

March 13, 2008 by 2 Comments

Fannie Mae’s underwriting guidelines for the temporary conforming loan limits have been released and it looks like the new loan amounts are not going to be as helpful as many had hoped.   The new guidelines for loan amounts between $417,001 – $567,500 in King, Snohomish and Pierce Counties are far more strict.

The biggest whammy is that if you were hoping to combine your first and second mortgage (or heloc) into one new conforming-jumbo mortgage, you’re out of luck.  Fannie is not allowing any "cash out" refinances.  This means that even if you were just paying off the two mortgages and not receiving a nickle back at closing–it’s not going to fly. 

You must have a minimum of 660 credit scores for a fixed rate purchase for a LTV of 80% or less for a purchase using a fixed or adjustable rate.

Limited cash out refinances are allowed up to 75% loan to value with a minimum 660 credit score.  Limited cash-out means that you are allowed to roll in the closing costs to the refinance and receive no more than $2000 cash back at closing (no second mortgages/helocs can be included in the refinance).

Update:  it appears that Freddie Mac will allow cash out refinances up to a 75% loan to value with a 720 minimum credit score.

Adjustable rate mortgages are qualified at the fully amortized PITI at the higher of the note rate or fully indexed rate (worse case rate). 

Be prepared for a "full doc" mortgage.  There is no "stated income" allowed.   You will also need two months of reserves (PITI) and are limited to a 45% DTI (debt to income) ratio.

You can only have four financed properties, including your principal residence.

On Monday, I believe lenders will finally unveil pricing…which again is said to not be as exciting as consumers had hoped.  I’m hearing that the rates will fall between current Jumbo and conforming.   

Rumor has it that the FHA-jumbo will be more friendly to "jumbo" homeowners…if they can get over paying the upfront MIP (1.5% of your loan amount) and monthly mortgage insurance (0.5% of your loan amount/12 months).   For example, on a $500,000 loan amount, the upfront MIP would be $7500 (typically financed into the loan) plus monthly mortgage insurance in the amount of $208.33…even if you have an 80% loan to value.  We’ll just have to wait and see a couple more days.

Remember, these loan limits only last through December 31, 2008.

More to follow. 

Filed Under: Home Equity Loans & Second Mortgages, Jumbo/Non-Conforming, Refinance, Residential Purchase

Shiney New and Temporary Conforming Limits…Not So Fast!

March 7, 2008 by Leave a Comment

I feverishly posted the new FHA and conforming loan limits for Washington State.  It was pretty darn exciting since many of us in the industry were hearing whisper figures of $493k or so and voila, our new FHA and conforming limit for a single family dwelling is $567,500 for King, Snohomish and Pierce Counties.  This could be a nice bump through the end of this year.

The word is out!  Many Seattle, Bellevue, Everett and Tacoma area homeowners are VERY interested and want to take advantage of "conforming rates" now.   Not so fast….sorry.  (Hey…I’m really hoping that on Monday, I’m eating my words…the proof is in the pudding).   So far all that’s happened is that the loan limits have been announced.   This whole process needs to trickle from Fannie Mae and Freddie Mac and through all the wholesale lenders before those of us on "the streets" can offer you any benefits.   

Be prepared.  I fully expect an "add to rate" on loans from $417,000 – $567,500 (or what ever your area conforming limit is).   This will be to compensate Freddie/Fannie for the additional volumes and risk they are taking on.   The big question is: how much will it be?  My best guess is anywhere from 0.25% to 1.00% to what you currently see for conforming.   

"WHAT?" You say… "You’re telling me that you just quoted 6.00% for conforming today…and 7.00% for JUMBO…yet the new conforming rate for loans over $417,000 may still be 7.00% if I were locking today?"

Yes…that’s what I’m saying.  Again, PURE speculation on my part.

The "new conforming limit" goes back to July of 2007.  It’s retroactive for jumbo mortgages still not bought on Wall Street clogging credit lines.   I think that’s where we may see the most action:  rescuing the Thornburg Mortgages of the world (or at least Wall Street).  This from Bloomberg:

Thornburg specialized in so-called jumbo mortgages of more than $417,000, which typically were used to buy more expensive homes. Until recently, such loans were too big to qualify for purchase by government-sponsored entities such as Fannie Mae. Trading for such “non-conforming loans has come to a standstill, cutting off a source of funds for mortgage companies and pushing down the value of their holdings. More than 100 halted operations or sought buyers last year.

The company’s demise would reduce liquidity even more, said Keith Gumbinger, vice president of HSH Associates, a mortgage- market research firm based in Pompton Plains, New Jersey.

“No one has had anything bad to say about Thornburg; they have served the good-quality, high end of the market,” Gumbinger said. “It’s been a good, well-run business that is taking a beating because of market conditions.”

Thornburg is not a part of the subprime melt down they are being sucked into.  My best guess is that due to the volume and risk of loans that Fannie and Freddie will take on through the end of this year, consumers will see a benefit in pricing when the credit lines have been relieved.   

This may not be the band-aid we’re hoping for.  I don’t want to be a "bummer"…I do want to be practical. 

My best advise to those in the "new (temporary) conforming market" is to not wait for the new limits to be in effect.  Check with your Mortgage Professional to see if they can switch your program to "new conforming" IF it’s a better rate/scenario for you if you’ve all ready began the process under the current guidelines.  This is something that I can offer and I would assume most Mortgage Professionals are able to as well.

Filed Under: FHA, Legislation, Mortgage, Residential Purchase

New Conforming Loan Limits

March 6, 2008 by Leave a Comment

OFHEO just released the temporary conforming loan limits (through 2008).  It does not appear as though that every county that received an increase in FHA limits received one with conforming.   Here is what I show for Washington State:

King, Pierce and Snohomish Counties

1 Family – $567,500

2 Family – $726,500

3 Family – $878,150

4 Family – $1,091,350

Kitsap County

1 Family – $475,000

2 Family – $608,100

3 Family – $735,050

4 Family – $913,450

Clark and Skamania Counties

1 Family – $418,750

2 Family – $536,050

3 Family – $648,000

4 Family – $805,300

San Juan County

1 Family – $593,750

2 Family – $760,100

3 Family – $918,800

4 Family – $1,141,850

Jefferson County

1 Family – $437,500

2 Family – $560,050

3 Family – $677,000

4 Family – $841,350

This data is still very new and I’m just making it available to you as soon as I receive it.  More information will follow.

Filed Under: Mortgage, Refinance, Residential Purchase

New FHA Loan Limits are here!

March 6, 2008 by 3 Comments

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.

 

Filed Under: FHA, Mortgage, Refinance, Residential Purchase

Second Mortgages and “Low Down” Mortgages

February 28, 2008 by Leave a Comment

SunTrust Bank, one of the lenders we work with, is joining the ranks of other lenders who are eliminating or shelving their second mortgage products, including their combos where they have the first and second mortgage (such as an 80/10/10).  Where we once had several options for second mortgages and HELOCs, we are down to just a few.

Another bank that is still offering second mortgages (fixed and HELOCs) are limiting the total loan to value to 80% if your mid-credit score is 680-699.  A 700 credit score will allow you to go up to 85% total loan to value.

We do have another option for second mortgages that will go to a higher loan to value with lower credit scores…you pay the price with rates up to 3 points higher than what the other bank offers (with the lower loan to value).

What are your alternatives if you do not have 20 or 15% down? 

  • Seller financing for a second mortgage (private deed of trust subject to approval with underwriting).
  • Private mortgage insurance.  Upfront, monthly or lender paid.
  • FHA insured mortgages (subject to loan limits which will be changing soon)
  • VA insured mortgages

If you are currently preapproved to purchase a home and you are using an 80/10/10 or 80/15/5, I urge you to contact your Mortgage Professional to confirm your preapproval is still valid and to develop a "Plan B" for your home purchase strategy.   Some private mortgage insurance companies are also pulling back on higher loan to value mortgages (this includes lpmi and Fannie Flex); if you’re using less than 10% down with a pmi scenario–check with your Mortgage Professional for "Plan B" as well.

Filed Under: FHA, First Time Home Buyer, Home Equity Loans & Second Mortgages, Mortgage Insurance, Residential Purchase

My Valentines Post on Commitment

February 14, 2008 by 3 Comments

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 Post:  When Are You Obligated to a Loan Originator?

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

Filed Under: Refinance, Residential Purchase

Tomorrow Morning I’ll Either Look Like a Hero or a Zero

February 6, 2008 by 3 Comments

Hero

Just before 5 tonight I provided a Good Faith Estimate along with a Total Cost Analysis comparing four price points for a 30 year fixed rate purchase closing at the end of March.   You see most lenders are not allowing locks to take place “after hours”; you have to wait until the markets re-open in the morning.  This home buyer is still shopping rates with various lenders and so when she calls them tomorrow, my estimate is either going to look outstanding because rates have increased (and I won’t be able honor it since it’s not locked tonight) or I’m going to look like a mooch with higher rates because the market has improved.  Unless rates are unchanged, the rate on my good faith estimate is worthless.

[Read more…]

Filed Under: Interest Rates, Mortgage, Residential Purchase

New Mortgage Porter Feature: Weekly Tips

February 6, 2008 by Leave a Comment

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)!   

Filed Under: Credit Scores and Reporting, Refinance, Residential Purchase, Tech/Tools of the Trade
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