How much home do I qualify for with a $70,000 down payment?

January 24, 2013 by Leave a Comment

I’m working with a couple in Seattle who would like to buy a home. They have excellent credit (scores of 740 or higher) and are planning on using $70,000 for their down payment and closing cost. They want to know how much home they can buy based on their down payment.

The following rate quotes are effective as of January 24, 2013 at 12:20 pm. Rates change constantly, for your personal rate quote for a home located in Washington state, click here.

Conforming High Balance allows them to buy a home priced at $576,000.

The conforming loan limit in Seattle/King-County is currently $506,000. Using a conventional mortgage, they could buy a home priced at $576,000. 

Current mortgage rates for a 30 year fixed conforming high balance ($417,001 – $506,000) based on this scenario is 3.750% (apr 4.094).  

3.750% is priced as close to “par” as possible meaning there is as little rebate credit or discount points priced with the interest rate. We could adjust the rate slightly higher to create more rebate credit to help pay for closing cost or we could reduce the rate by paying more in discount points. 

The loan to value based on a sales price of $576,000 and loan amount of $506,000 is 87.874% which means the Seattle home buyers will have private mortgage insurance (pmi). For this client, we’re opting to include the pmi in their mortgage payment instead of paying it as an upfront additional closing cost or doing “split premium” mortgage insurance.  

The principal and interest payment is $2,343.36 plus private mortgage insurance of $282.52 gives us a “PIMI” payment of $2,625.88. Property taxes and home owners insurance are additional.

The Seattle home buyers will negotiate the seller paying for remaining closing cost and prepaids/reserves estimated at $7900, leaving their amount due at closing very close to $70,000.  If the sellers opt to not pay for closing cost and prepaids, the buyers can use rebate pricing (slightly increasing the mortgage rate) to offset the cost.

FHA allows them to buy a home priced up to $637,500.

FHA mortgages in the Seattle/King County area have a loan limit of $567,500. With a down payment of $70,000 they could buy a home priced up to $637,500. The big difference between FHA and conventional financing is the mortgage insurance. FHA has both upfront and monthly mortgage insurance. 

The current mortgage rate I’m quoting for their FHA scenario is 3.375% (apr 4.059%).

This rate is priced with a little more rebate to help reduce closing cost. If the Seattle home buyers want a lower rate with less rebate credit, they certainly can opt for that. Mortgage rates are not locked until we have a bona fide contract and the rates will be “floating” while they shop for a home.

The principal and interest on this rate and loan amount is $2,552.80 with mortgage insurance at $562.43 providing a PIMI payment of $3,115.23. Property taxes and home owners insurance are additional.

After the rebate credit, if the buyers negotiate the seller paying the remaining balance of their closing cost, prepaids and reserves in the amount of $4,000, the buyers will need around $70,000 for funds due at closing.

VA loans allow them to purchase up to $780,000 with a “VA Jumbo” loan.

The VA zero down loan limit in Seattle is $500,000. When a loan amount exceeds the limit, eligible Veterans can have a down payment based 25% off the difference between the sales price and loan amount.  

For example, a sales price of $780,000 less $500,000 loan limit = $280,000. $280,000 x 25% = $70,000 down payment.

The current rate I’m quoting for this VA Jumbo 30 year fixed loan is 3.250% (apr 3.379).

The principal and interest payment on this loan is $3,136.31. There is no mortgage insurance on a VA loan. Property taxes and home owners insurance are additional. 

If the seller pays for $4500 of the Veteran’s closing cost and prepaids, then the amount due at closing will be around $70,000.

USDA loans are not eligible in the Seattle area because it’s not a rural area.

If you are interested in buying a refinancing a home located anywhere in Washington state, I’m happy to help you. I’ve been originating residential mortgages at Mortgage Master Service Corporation since April 2000. 

Filed Under: Mortgage Programs, Fannie, Freddie and FHFA, Residential Purchase, VA Mortgage Loans Tagged With: , , , , ,

Seattle PI reports Surging Home Prices in King County

December 8, 2012 by Leave a Comment

This week Aubrey Cohen from the Seattle PI reported that sales prices in King Count jumped up just shy of 20% last month:

The median price of a King County house that sold in November was $385,000, up 19.7 percent from a year earlier and 4.1 percent from this October, the Northwest Multiple Listing Service reported Wednesday. The median price in Seattle was $425,000, up 18.1 percent from last November and 1.2 from October.

Some non-distressed homes continue to experience bidding wars as inventory remains low. Here are some tips on what you can do to prepare for a “bidding war”.

Experts speculate that part of the jump in sales price could be from home buyers taking advantage of extremely low mortgage rates to buy a higher priced home.

If you are interested in buying a home, whether it’s your primary home, a vacation home or an investment property, I strongly recommend getting preapproved first. Being preapproved will help give you an advantage over unprepared buyers. 

If you are considering buying a home anywhere in Washington, I’m happy to help you with your mortgage needs. I have helping people buy and refinance homes in Washington at Mortgage Master Service Corporation since April 2000.

Filed Under: Economy, Residential Purchase Tagged With: , , ,

HUD extends FHA’s Flipping Waiver through 2014

December 4, 2012 by 1 Comment

HUD recently announced they will extend the “anit-flip waiver” through December 2014. Without this waiver, home buyers would not be able to use FHA financing for homes that are considered being “a flip” ( a property that is quickly resold at a much higher price).

From the Federal Register:

Prior to the waiver, a mortgage was not eligible for FHA insurance if the contract of sale for the purchase of the property that secured the mortgage was executed within 90 days of the prior acquisition by the seller, and the seller did not come under any of the exemptions to this 90-day period specified in the regulation.

Through the regulatory waiver, FHA encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes, with the objective of increasing the availability of affordable homes for first-time and other purchasers, helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high. The waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, and is not limited to foreclosed properties. Additionally, the waiver is subject to certain conditions, and mortgages must meet these conditions to be eligible for the waiver.

The Waiver continues to be limited to sales meeting the following conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value.
  • Seller must be by the owner of record
  • Property may not have been a repeatedly “flipped” over the past year
  • Property was marketed openly and fairly
  • The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. [Reverse Mortgages]

When a home is being resold 20% or higher than what the seller purchased the property for in less than 90 days, often times a second appraisal will be required and the seller will need to show documentation to support the increased value in the home, such as receipts for the improvements made. A property inspection report will also be required by the lender to assure the quality of the improvements made to the property. Any health or safety issues disclosed by the property inspection will need to be corrected.

If a home has been re-sold withing 91-180 days at more at 100% or more than the seller’s acquisition cost, the same conditions will apply.

NOTE: If a second appraisal is required, the home buyer is not allowed to pay for it per HUD. And you can pretty much count on that second appraisal being required. Thanks to LO Comp being passed by the Fed in 2010, your friendly mortgage professional is not allowed to pay for the appraisal either.  

Investors (aka Flippers) who are reselling in a short period of time for a much higher amount than their acquisition cost should be prepared for the cost of the second appraisal when the buyer is using a FHA mortgage for financing. They should also retain detailed records of improvements (including all receipts) when they’re planning to quickly resale a home. The seller’s acquisition cost is the sales price of the home, plus the seller’s closing cost, including real estate commissions. It does not include any repairs. 

If you are considering buying a home located anywhere in Washington State, I’m happy to help you! Click here for a mortgage rate quote for homes located anywhere in Washington.  I’ve been originating home loans at Mortgage Master Service Corporation since April 2000, including FHA insured loans.

Filed Under: Mortgage Programs, Residential Purchase Tagged With: , ,

How can a preapproval change?

September 14, 2012 by 2 Comments

MortgageWhen someone becomes “preapproved” for a mortgage, it boils down to they qualify for a certain mortgage payment based on their income and debts (DTI aka debt to income ratio).  A home buyer qualifies for the loan amount of the new mortgage and their funds available for down payment and closing cost determine the sales price.

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Filed Under: Residential Purchase Tagged With: , , ,

King County Home Prices are up 7% from last year

August 8, 2012 by Leave a Comment

The Seattle Times reports that home prices for King County have jumped up 7.2% from July last year. This pencils out to $25,250 with the median sales price of $375,250. The article also notes that closings are up 26% YOY which is great news for the housing industry. It doesn’t matter how low mortgage rates or home prices are unless transactions can actually close.With less inventory, many buyers are finding themselves in bidding wars or having a property in contract before they can get their offer together. From the article:

“Another recurring theme is the dramatic drop in the number of homes for sale. Home listings have been sliding for a full year; in July the number of home listed for sale was down 38 percent year-over-year…

…distressed home listings — bank-owned properties and short sales — are down 60 percent from last year. This also contributes to the small number of listings and brings up home prices.”

Part of the reason for the low inventory, per Seattle real estate economist Matthew Gardner, is that many people are not able to sell because they are underwater with their mortgages and don’t want to go through a short sale.

If you’re considering selling and your property is non-distressed (you have enough equity to sell), this could be a great time with more buyers than sellers.

If you’re underwater with your home and would like to sell once you have equity, you might consider a HARP 2.0 refinance (if your last conforming mortgage closed prior to June 2009) or an FHA streamlined refi (if your existing mortgage is FHA). While you wait for home values to continue to trend higher, why not save on your monthly mortgage payments?

If you’re a home buyer, I cannot stress enough how important it is to be fully preapproved BEFORE you start shopping for a home. If you’re considering buying or refinancing a home in Seattle, King County or anywhere in Washington state, I’m happy to help you!

Filed Under: Economy, Residential Purchase, Seattle Tagged With: , ,
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