What May Move Mortgage Rates the week of April 23, 2012

April 23, 2012 by Leave a Comment

Here are some scheduled economic indicators that are scheduled to be released the week of April 23, 2012:

Tuesday, April 24: Consumer Confidence and New Home Sales

Wednesday, April 25: Durable Goods Orders and FOMC Meeting

Thursday, April 26: Initial Jobless Claims and Pending Home Sales

Friday, April 27: Consumer Sentiment Index (UoM); GDP – Gross Domestic Product and ECI – Employment Cost Index

Remember, when the stock market is getting pummeled, bonds (like mortgage backed securities) tend to improve as investors will seek the safety of bonds. The reverse is also true – when the DOW is having a great day, we tend to see mortgage interest rates rise.  As I write this post (10:11 am) the DOW is down about 141 and mortgage backed securities are in the "green".

It is highly unlikely that the Fed will make any changes to the Fed Funds Rate on Wednesday. Investors will be all ears to hear what the Fed has to say including signs of inflation or if the economy is improving (both of which may cause mortgage rates to trend higher).

For your personal mortgage rate quote for homes located anywere in Washington state, please click here.  You can also see mortgage rates that I'm quoting "live" by following me on Twitter.

Filed Under: Economy

HARP 2 and Appraisal Waivers

April 19, 2012 by 1 Comment

When the expanded guidelines of the Home Affordable Refinance Program (aka HARP 2) were released late last year, they announced that loan to value (LTV) restrictions were being removed. It all sounds very simple however, no big surprise here, there’s a little more to it.

[Read more…]

Filed Under: Appraisals, HARP - Home Affordable Refi Tagged With: , ,

Reader Question: Does Getting a Mortgage Preapproval Impact my Credit Score?

April 18, 2012 by Leave a Comment

One of my Seattle subscribers wrote me to ask this great question:  

“I’m considering purchasing a home soon, but I’m concerned about getting preapproved too early.  If I get preapproved and don’t find a home until the preapproval expires and I need a new one, will the credit hit from the first approval damage the score of my second approval?”

Credit scoring is intended to reflect a persons credit habits. When a credit report is pulled by a mortgage originator, a persons score may go down a few points. The initial pull of your credit report will help determine if there’s anything that needs to be address to help improve your scenario before you find your next home. It’s not uncommon to find that your score may be lower than what you estimated, perhaps there’s a parking ticket, or or a payment was reported late that you’re not aware of. This is the time to find out.

Loan preapprovals generally last around 90 days (this may vary depending on how old your supporting documentation is that was provided to validate your preapproval). Your credit report may not need to be repulled until you have a bona fide offer if at all depending on when your transaction is scheduled for closing.  Sometimes a “second preapproval” can be updated with new paystubs or bank statements.

Credit scoring is accumulative. So if you’ve been shopping for a car or a big screen television, these inquiries compounded with one from your mortgage lender will have more of an impact than just the credit being pulled for a preapproval alone.  By the way, if you’re shopping for new credit before (or during) being preapproved for a new home, be ready to explain every one of your credit inquiries. 

Odds are, if you’re worried about your score dipping from being preapproved you really should proceed with having it pulled by a local, licensed mortgage originator now…just in case a little elbow grease can help pump up your scores. Something as simple as paying down a debt to be under 50 or 30 percent of the total credit line may make a difference for an improved mortgage rate or qualifying for certain mortgage program.

I tend to lean towards getting preapproved as soon as possible. At the very least, it’s an opportunity to develop a game plan to make sure you’re in the best position possible for qualifying for your next mortgage. In addition, I’m seeing more non-distressed home homes in the greater Seattle area that are having multiple offers or “bidding wars”. If you’re considering buying a home, you’re going to need to be prepared with a preapproval letter from a reputable lender. You never know when a home that you want to make an offer on may become available.

If you’re considering buying a home in Seattle, Redmond, Walla Walla or anywhere in Washington, I’m happy to help you with your mortgage preapproval. 

Filed Under: Residential Purchase Tagged With: , ,

FHA Underwriting Guidelines Tightening

April 13, 2012 by 2 Comments

UPDATE 6/19/2012: HUD has rescinded some of the guidelines issued in this Mortgagee Letter. Specifically those addressing collections and disputed accounts.

In late February, HUD released Mortgagee Letter 2012-3 with tougher guidelines for self-employed borrowers, disputed accounts and collections. Over the weekend, HUD amended the guidelines to have the disputed accounts and collections go into effect on July 1, 2012.  However the new guidelines for self employed borrowers went into effect for case numbers as of April 1, 2012.  

Here is a quick(?) 4-1-1 of the new guidelines:

Income documentation requirements for self-employed borrowers:

A P&L and Balance Sheet is required if more than a calendar quarter has elapsed since the date of most recent calendar or fiscal-year end tax return was filed by the borrower with no exceptions.

If income used to qualify the borrower exceeds the two year average of tax returns, an audited P&L or signed quarterly tax returns obtained from the IRS are required.

NOTE: This is in addition to providing two years your most recent complete (all schedules) personal and business tax returns. Borrowers who are doing an FHA non-credit qualifying streamline refi may be exempt.

Disputed accounts on your credit report: 

When an account on your credit report shows as being disputed, the application will be referred to a DE underwriter for review unless:

  • The TOTAL oustanding balance of all disputed credit accounts or collections are less than $1000; and
  • Disputed credit accounts or collections are aged two years from the date of the last activity as indicated on the most recent credit report.

Disputed credit accounts or collections resulting from identity theft, credit card theft, or unathorized use, etc., will be excluded from the $1000 limit provided acceptable supporting documentation can be provided, such as a police report.

 

Disputes on authorized user accounts are also factored into the $1000 limit.

NOTE: Conventional financing has really cracked down on disputed accounts as well.

Collections:

If the total outstanding balance of all collection accounts is equal to or greater than $1000 the borrower must resolve the accounts (e.g. enter into payment arrangements with minimum three months verified payments) or paid off in full at time of or prior to closing. 

If the total outstanding balance is less than $1000, the borrower is not required to pay off the collection accounts as condition of the mortgage approval.

NOTE: If you're paying off collections, please consult with your mortgage originator before you do and remember to always obtain documentation to show your account is satisfied and paid in full.

If you're planning on paying down balances of disputed accounts and collections to reduce the accumulative balance to $1000, you can forget about it.  HUD says this is a no-go. 

But wait… there's more! 

As Washington is a community property state, if a non-purchasing spouse has outstanding collections and/or disputed accounts, the unpaid balances must be considered in the $1000 cumulative limit UNLESS documentation can be provided to document the debt incurred prior to the marriage – it's possible an attorney's opinion letter may be required stating the borrower was not responsible for that debt.

Medical collections are included (NOT excluded) from the $1000 cumulative limit. This is possibly the most surprising to me as FHA, in the past, has been more forgiving of medial debts. Not so anymore.  

 

Yet…I'm also reading in the FAQs that unpaid charge-offs are not factored into the $1000 accumulative limit. I find this interesting as lenders view charge-offs as collections. Although HUD might be okay with charge-off's, I would anticipate lender underwriting over-lays on this one.

Speaking of underwriting overlays, we still need to see how lenders will embrace the new guidelines. Although the disputed accounts and underwriting guidelines for collections have been delayed until July, it's quite possible some lenders might implement these guidelines earlier.

Stay tuned and get started on your preapproval for your mortgage EARLY.

If I can help you with a home located anywhere in Washington, please contact me.


 

Filed Under: FHA, Underwriting and Qualifying

You Don’t Have to Wait Until June to Start Your FHA Streamlined Refi

April 11, 2012 by Leave a Comment

If you currently have an FHA insured mortgage that was *guaranteed* prior to June 1, 2009, you may qualify for significantly reduced mortgage insurance premiums with an FHA streamlined refinance.  Effective June 11, 2012, HUD will offer the reduced premiums for those who meet HUD’s criteria. The good news is, if you qualify for the reduced premiums, you don’t have to wait to lock in today’s low rates – just do a longer lock!

Why HUD, in all their wisdom, used the date an FHA loan was guaranteed beats the heck out of me. This has nothing to do with when your FHA mortgage closed; it’s when HUD has insured the loan which often takes place weeks or even a few months after closing.

If you have been considering refinancing your FHA mortgage with an FHA streamlined refi, and you closed on your last FHA mortgage prior to June 1, 2009, you may want to check with a local lender to see when your current mortgage was endorsed.

If you’re one of the lucky ones, you can actually start your application now (click here to apply on line if your home is located in Washington) and wait until June 11, 2012 to order your FHA case number.  We can also watch rates to determine when to lock. The longer the lock period, the more the rate cost. You can see by the rates posted below –  locking now with an extended lock period looks pretty good!

NOTE: Rates quoted below are from April 2012 – for your current mortgage rate quote on Washington homes, click here.

Here’s are some scenario’s for FHA streamlined refinances based on rates as of the writing of the post (4/11/2012 12:45pm PST) and the borrower having mid-credit scores of 720 or higher in greater Seattle:

Base loan amount of $400,000 for a 30 year fixed rate mortgage:

FHA Streamlined Refi with existing mortgage NOT qualifying for the reduced mortgage insurance premiums (mortgage not guaranteed by May 31, 2009 or sooner by HUD):

3.750% (apr 4.743%) with a PIMI (principal, interest and mortgage insurance) payment of $2,298.06. 

FHA Streamlined refi (existing mortgage was guaranteed by HUD prior to June 1, 2009) with closing by June 18, 2012 (long enough time period to obtain the reduced mortgage insurance premiums):

3.750% (apr 4.141) PIMI payment of $2,034.45. You don’t have to wait to lock in today’s low rates!  This pricing is based on a 75 day lock – or you can start the process and lock in at anytime you choose as long as the lock period is beyond June 11, 2012.

This is especially huge for FHA Jumbo’s which are really being hit hard with the higher FHA mortgage insurance premiums. In the greater Seattle area, this impacts FHA loans with a base loan amount of $417,001 to $567,500.

Here’s how the payments compare for an FHA Jumbo with a base loan amount of $565,000 and 720 mid-credit scores: 

FHA Jumbo Streamlined refi where existing mortgage was guaranteed June 1, 2009 or later:

3.750% (apr 4.589) with a PIMI payment of $3,222.66.

NOTE: FHA annual mortgage insurance will increase again for high balance/jumbo FHA loans by an additional 0.25% effective June 11, 2012. This increase would cause our above scenario (if they waited until June 11, 2012 to get their case number) to have a PIMI of $3,339.38 (apr 4.732). If you fall into this category: FHA high balance (aka jumbo) guaranteed after May 31, 2009, you will want to obtain your FHA case number BEFORE June 11, 2012.

FHA Jumbo Streamlined refinance where the existing FHA mortgage was guaranteed May 31, 2009 or sooner priced with a 75 day lock to close after the FHA case number is obtained on June 11, 2012:

3.875% (apr 4.214) with a PIMI payment of 2,913.94.

Another reason to consider starting your application now is that it will allow you have time to review your credit. There may be small adjustments you can make that will improve your credit score and quite possibly your interest rate – the point is, you have some time to check it out and make sure you’re in the best position prior to closing. 

If your home is located anywhere in Washington state, and you’re considering an FHA streamlined (or any type of) refi, I’m happy to help you! 

You don’t have to wait to start your FHA streamlined refi and gamble rates going higher, unless you want to.

Filed Under: FHA, Refinance Tagged With:

What May Move Mortgage Rates the week of April 9, 2012

April 9, 2012 by 1 Comment

mortgageporter-economyThis morning, mortgage rates are trending lower from Friday’s Jobs Report coming in with weaker than expected data. As I write this post (10:15 am) the DOW is down about 115.

Watch for possible signs of inflation this week, which may reverse the downward trend in rates, with the scheduled economic indicators referenced below:

Wednesday, April 11: Fed’s Beige Book

Thursday, April 12: Producer Price Index (PPI) and Initial Jobless Claims

Friday, April 13: Consumer Price Index (CPI) and Consumer Sentiment (UoM)

If you would like your personal rate quote for your Washington State home, click here.

Filed Under: Interest Rates

Seattle Sunday Drive to Olympic Sculpture Park

April 8, 2012 by Leave a Comment

Last week, on our anniversary, we decided to check out the Olympic Sculpture Park which is located in the heart of Seattle on Western Avenue.  2012-04-01 11.20.31

I’ve driven by this giant eraser numerous times but this was my first time to get a “close up” at the actual park.

2012-04-01 11.30.59

Probably my favorite part of the park was the metal tree. Even on a grey Seattle day, the shiny silver branches were striking.

2012-04-01 11.23.42

This photo reminds me of giant cargo ships.

2012-04-01 11.16.45

I’m probably more “traditional” when it comes to art. However, I enjoyed strolling through the park on partly sunny day to check out the creations in a natural urban setting.

View more of my photos of Seattle’s Olympic Sculpture Park here.

Filed Under: Seattle, Sunday Drive - Neighborhood Tours Tagged With:

How often will I have to supply documentation for a mortgage?

April 5, 2012 by 1 Comment

OnionI've often thought that the loan process for a borrower is similar to peeling an onion. At the very beginning stages, when a borrower is considering obtaining a mortgage and they discuss their scenario with their mortgage originator, they appear to be a smooth, shiny Walla Walla Sweet. As the process continues, more layers are removed as documentation is provided. Sometimes when several layers have been peeled away, you no longer have an onion or at least, not the one you originally started with. It's crucial that a mortgage originator takes an in-depth interview with their clients before they enter into a transaction (purchase or refinance) to make sure as much their financial information has been addresses as possible. There may be a significant difference between how a borrower views their financial scenario and what their supporting income and asset documents tell to an underwriter. 

Here are some of the stages that a borrower can expect to have documentation requested by their mortgage professional:

Preapproval. A preapproval is different than a "prequalification". When you're preapproved, expect to provide income/employment and asset documentation to support the information you've provided to your mortgage originator. The items that are requested may be standard or specific if the mortgage originator used an "automated underwriting system" (AUS).  NOTE: if you have not provided any supporting documentation to your mortgage originator, you probably have not been "preapproved".  It's possible that if it's been a while since your mortgage was preapproved, you may need to provide additional information (recent paystubs or bank statements, for example) to update your preapproval.

Processing. Once you have a bona fide transaction, your loan application is "in process". At this time, my Processor will review my clients file with a fine tooth comb to see if there's anything I may have missed. It's possible at this stage, that a borrower may be asked to provide additional documentation. Depending on the loan program, sometimes longer time periods are required (30 days of most income documents or two months most recent paystubs, for example). This is also the stage when IRS tax transcripts are pulled (from your signed 4506T) which may also trigger questions and the need for additional documentation. Our goal is to provide a solid file to our underwriters so the end result is less "conditions". 

When your appraisal comes in you will be required to sign disclosures acknowledging you received a copy of your appraisal. By the time you're done autographing all of your paperwork required in a mortgage transaction, you may feel like a very popular rock star.

Underwriting. Once we have a complete loan package with all of the supporting documents, the file is submitted to our underwriting department. Once again, the transaction is being closely reviewed to make sure the documentation provided is in-line with the program guidelines and lender overlays. Once we have preliminary approval from underwriting, it's normal to have some "conditions" which typically means…yep, you guessed it, providing more documentation or writing a letter explaining a specific circumstance (LOE). 

There are primarily two types of conditions from underwriting:

  • Prior to Doc: these items must be provided before loan documents can be prepared.
  • Prior to Funding (or Closing): these items will not hold up your loan documents being prepared and can be provided prior to your loan closing.

Prior to funding, your employment is re-verified and a soft pull on your credit report may be done to verify you do not have any new debts and that you are still employed. If there are changes to your loan application (new debt or employment) be prepare to provide more documentation. If you've made changes to your application (debts, assets, income or employment) during the transaction – you must notify your mortgage originator. You're signing a "final" loan application at closing which needs to reflect your financial scenario – if it does not, you may potentially be commiting fraud. In addition, when changes to an application are found at this late stage in the transaction, it's probable the closing will be delayed.

Every time a document is provided to underwriting for review, it's possible it may trigger a new condition.  For example, a bank statement may disclose large deposits, which will need to documented where the source of funds came from or it may show the borrower has bounced checks, which could require a written letter explaining why the NSF happened. 

Why all this documentation? Basically, it's thanks to recent years past with the mortgage meltdown and fraud. Providing everything that is requested by your mortgage professional will help expedite your transaction. 

The days of "stated income" loans are gone. There are some streamlined mortgages that allow for less documentation, such as an FHA streamlined refinance and HARP, depending on the automated underwriting response from Fannie or Freddie.   

If you're interested in getting preapproved for a mortgage for a home located anywhere in Washington State, I'm happy to help you. I have been helping Washington home owners at Mortgage Master Service Corporation buy and refinance since 2000.

Photo Credit: Doc Wert via Flickr

Filed Under: Underwriting and Qualifying Tagged With: ,
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