Conforming and FHA Higher Loan Limits MAY be Returning

October 21, 2011 by 1 Comment

The Senate has passed an amendment that will bring the temporary loan limits back through December 31, 2013!  In the Seattle/King County area, this means that the FHA and conforming high balance loan limit would increase from $506,000 to $567,500.

This still needs to pass the House.

It's like deja vue all over again! Congress yo-yo'd the loan limits a few years ago between the high balance and temporary high balance loan amounts.  Should Congress pass this and restore the higher loan limits, it may take banks some time to adjust to the changes. 

Stay tuned!

Filed Under: Fannie, Freddie and FHFA, FHA

How Disputes on Your Credit Report May Impact Obtaining a Mortgage

October 20, 2011 by 1 Comment

Reviewing your credit report and disputing information that is being wrongly reported about you is your right under the Fair Credit Reporting Act. Obtaining your credit report and making sure that it’s accurate is financially responsible and your duty to protect your credit. And the Federal Trade Commission provides you tips on how to dispute items on your credit report.  Did you know that lenders may not accept a credit report where it indicates there is a disputed item? 

It doesn’t matter if you have perfect credit or a low loan to value, Fannie Mae and Freddie Mac guidelines are forcing lenders to provide a credit report without disputes. I’ve recently had transactions where the borrower doesn’t recall disputing anything and the debtor doesn’t have record of the dispute yet this “dispute” needs to be removed from the credit report or the lender/bank will not accept the loan. This is one reason why anyone considering a mortgage for refinancing or purchasing a home should obtain a copy of their credit report very early on. It can take a great deal of time to have disputes removed if a borrower does this on their own.  

The other option is for a “rapid rescore” which whittles down the process to days. The irony in this is that rapid rescore is not free and it is the credit bureaus and reporting agencies who profit when this service is done – I really have a problem with this when my client and the creditor state there are no disputes of record yet somebody has to pay to have these items quickly removed to accommodate a closing date. Often times, the lender absorbs the cost of the rapid rescore however this eventually drives up the overall cost of doing business and eventually, the consumer pays.

In my opinion, this is something that Fannie Mae and Freddie Mac need to change pronto. Well qualified borrowers should not have to go through these hoops or have their mortgage denied. A simple written letter of explanation signed by the borrowers and possibly the creditor *should* suffice instead of requiring the credit report not show any sign of a dispute. Apparently back in 2009, Fannie was reviewing their policy however, I’m not aware of any significant changes.  

If our government wants to help the housing industry and our economy, this practice needs to stop now.

Filed Under: Credit Scores and Reporting, First Time Home Buyer, Rant Tagged With: , , , ,

How Much Home Can I Buy in Seattle with $45,000

October 18, 2011 by 2 Comments

I'm working with a couple who have saved $45,000 to buy a home in the greater Seattle area. Since conforming and FHA loan limits have been reduced to $506,000 in King County for the remainder of 2011, it reduces what they could have purchased a month or two ago. 

FHA.  Using an FHA insured mortgage, the couple can buy a home with a sales price of up to $551,000 assuming the seller pays for their closing cost and prepaids or that rebate pricing is used to cover closing cost and prepaids (or a combo of both).  The buyer must pay for the down payment with their own funds and gift funds are allowed by family for the down payment.  This is a pretty straight forward $506,000 loan limit pluse the $45,000 down payment.  

Conventional. $462,000 is the highest sales price with conventional financing based on using a conforming mortgage of $417,000 which would have the loan to value just over 90%. This scenario would also have private mortgage insurance which could be paid monthly, in a one time lump sum or as a "split premium" (a combo of both). With a loan to value of just over 90% means that the rate of private mortgage insurance will be much higher than if the buyers stick to a 90% loan to value. With a loan to value just over 90%, sellers are limited to contributing 3% towards closing cost.

If the buyers go this route, the maximum sales price they would qualify for with 10% down payment is $450,000 and sellers can contribute up to 6% towards allowable closing cost.

Conforming High Balance:  Loan amounts from $417,001 to $506,000 in the Seattle area may go up to 90% loan to value with private mortgage insurance, however 10% of the funds (the down payment) must be the borrowers and gifts are allowed only after the borrower has met the 10% requirement. Conventional loan amounts over $417,000 don't appear to pencil out for this scenario.  

NOTE: With conventional mortgages, if the gift from family is 20% or more, then there are no minimum required investments for the borrower.

VA. If my clients had served in the military and qualified for a VA loan, the maximum sales price in King County with a $45,000 down payment would be $680,000 assuming the sellers pay for all closing cost and prepaids or rebate pricing is used to offset the cost.

Technically, home buyers do not qualify for a "sales price".  They qualify based on the total mortgage payment (income and debts) and based on what funds they have available for down payment will dictate how much "sales price" they can buy.

If you would like to see what sales price you qualify for or become preapproved to buy a home anywhere in Washington, please contact me.

Filed Under: Residential Purchase

Checking Out Rates on the Internet, Newspaper or TV? Check the Freshness Date.

October 17, 2011 by Leave a Comment

MortgagePorterHourGlassHouse
When I’m reviewing rates with clients, many are surprised to learn how quickly pricing can change. It’s not unusual to hear a home buyer or someone considering a refinance say, “well how come I see “X” rate on the [insert your media here: internet, newspaper, television commercial, you get the idea]”.

As soon as a rate is posted, even on the internet, it may have changed. This is because mortgage rates are based on mortgage backed securities (bonds) and can change several times a day, similar to the stock market and sometimes just as volatile.  The more fresh a quoted mortgage rate is, the better odds you have of it being reliable.

[Read more…]

Filed Under: Interest Rates Tagged With: ,

Mortgage Update for the Week of October 10, 2011

October 10, 2011 by Leave a Comment

Today we recognize Christopher Columbus which means that the bond markets are closed. Did you know that October 9th is Lief Erikson Day?  Speaking of Europe, the DOW is up 277 as I write this post (10:35 am) since it looks like Europe may be getting closer to solving their financial crisis.  There are no economic indicators scheduled to be released today.

Here is what's scheduled for the remainder of the week:

Wednesday, October 12:  FOMC Minutes

Thursday, October 13:  Balance of Trade and Initial Jobless Claims

Friday, October 14: Retail Sales and Consumer Sentiment (UoM)

Remember, typically good news for the stock markets tends to drive mortgage rates higher as investors will trade the safety of bonds (like mortgage backed securities) for the greater returns possible with stocks. Last Friday was an example of this when the Jobs Report was released with better than expected data.

While we hope for good news for our economy and signs of recovery, keep in mind that this may cause mortgage rates to trend higher. Signs of inflation will also drive mortgage rates higher.

Although rates are still historically low, they have been trending higher over this past week. 

With the bond markets closed for Columbus Day, some of our lenders are taking the day off and we do others available should you decide you want to lock in a mortgage rate today for purchase or refinance in Washington.

Happy Columbus Day and belated Leif Erikson Day.

Filed Under: Mortgage

Private Mortgage Insurance Saves the Day for Refi’s with Low Appraisals

October 5, 2011 by 1 Comment

Recently a couple of my clients returned to me to refinance their Washington homes wanting to take advantage of the current historically low mortgage rates. The biggest gamble with a refinance is what the appraised value comes in at. We know at the beginning of the application if someone is qualified based on their income and what their credit scores are. We wait to until we receive the appraisal to learn what has been decided to be a current value based on what other like homes in the neighborhood have recently sold for.  If a home's loan to value is over 80% based on the the appraised value, the home owner has options depending on what the actual loan to value is. 

Private mortgage insurance has varying rates depending on risk factors, such as credit score, appraised value, loan program and income. The premium can be paid monthly, annually, by the lender (lpmi), single premium (paid once) or split premiums (a combination of monthly and a lump sum premium). If paid monthly, private mortgage insurance is set to be dropped from ones mortgage payment when the principal balance reaches 78% loan to value based on the original transaction.

Here's an example. A couple from Ballard want to refinance their mortgage with a total loan amount of $400,000 with no cash out (rate-term refi).  They have excellent credit scores (above 740) and have locked in a 30 year fixed at 3.875% (apr 3.978) with a principal and interest payment of $1881.  Mr and Mrs. Ballard would like the appraisal to come in at $500,000 or higher to meet the 80% loan to value criteria. Based on what their neighbors have sold their homes for recently (6-9 months) the appraisal comes in at $480,000 producing an 83.3% loan to value. It's disappointing at first however Mr. and Mrs. Ballard and ready to review what their possible options are. 

Bring in cash to make up the difference. $480,000 appraised value x 80% LTV = $384,000 possible loan amount with no mortgage insurance.  $400,000 proposed loan less $384,000 = roughly $16,000.  NOTE: this figure could probably be reduced with the use of rebate pricing (increasing the rate to reduce the cost) and other closing costs would be reduced based on the reduction of loan amount.

Add monthly private mortgage insurance. Based on their scenario, the rate would be 0.29% of the loan amount divided by 12 months = $96.67 monthly pmi. This premium will remain in their payment until the principal balance reaches 78% of the appraised value of $480,000, which should take approximately 41 months. If Mr. and Mrs. Ballard decides to go this route, their principal, interest and mortgage insurance payment will be $1978 and their initial closing cost will not be increased (apr 4.056). 

Pay a one time "single premium" mortgage insurance. Instead of increasing their monthly payment, Mr. and Mrs. Ballard can opt to pay pmi in one lump sum and be done with it!  The rate, based on their scenario, is 0.72% of the loan amount = a one time payment of $2880. This does increase their closing cost however their principal and interest payment will remain at $1881 (apr 4.039).

Mr. and Mrs. Ballard decide they like the single premium option considering that they won't have a mortgage payment due for one month after the closing of their new refinance and they're receiving a refund of the balance of their existing reserve account a few weeks after closing from their existing mortgage servicer.  Plus they'll break even with the one time mortgage insurance premium quicker than the monthly option. Both pmi options allow them to not dip into their cash reserves and to still proceed with the refinance.

In this climate, sometimes neighbors (or banks) have to sell homes for less than what they or you would like and appraisals may come in lower than expected.  It's good to know that there are options for when this happens. A piggy back second mortgage may be something to consider too with this type of scenario.

NOTE: If Mr. and Mrs. Ballard's existing mortgage qualified for a Home Affordable Refinance, there would not be any private mortgage insurance required and if their exisiting mortgage was FHA, they may have opted for a streamlined refinance without an appraisal (no potential loan to value issues) although the pmi rate is currently less expensive than FHA's mortgage insurance.

PS: For the record, appraisals may come in higher than estimated too. 

If you are interested in seeing obtaining a rate quote for a refinance or purchase on a home located anywhere in Washington, please contact me.

Filed Under: Appraisals, Mortgage Insurance, Refinance

Refinancing Your Seattle Area “High Balance” Mortgage Over $506,000

October 4, 2011 by Leave a Comment

If you obtained a high balance mortgage over the current limit ($506,000 in King, Pierce and Snohomish Counties) and missed the opportunity to refinance before the loan amounts were reduced, you may still have some options worth checking out. Especially with Fannie Mae hinting that loan limits may be reduced further in just a few months, effective January 1, 2012. FHA loan limits may be further reduced in 2012 as well. We typically learn what 2012 limits will be in November.  The gap between yesterday's higher loan limits and conforming/FHA loan limits may actually widen in a few months making most of these scenarios tougher to obtain in 2012.

Conventional Financing

Consider a Jumbo/Non-Conforming Mortgage. Fixed rates or adjustable rate mortgages may be worth your consideration depending on your financial plans. Non-conforming mortgages are for well qualified borrowers and require a minimum credit score of 720 and a maximum loan to value of 80%. Loan amounts of $506,001 and higher are now considered a jumbo in King County as well as Snohomish and Pierce.

Cash In Refinance. Not happy with how your investments are doing in the stock market? Some home owners are electing to use their savings or investments in to bring their principal balance down to the conforming loan limit.

Piggy Back Second Mortgage.  We currently are able to go up to 85% of the appraised value with a second mortgage.  The loan amounts can be structured to keep the first mortgage at 80% of the loan to value and/or at the county high balance conforming limit. Home owners need to be well qualified with credit scores of 720 or higher.  HELOCs and amortized fixed rates are available.

FHA Loans. If your existing mortgage is an FHA loan, you may be in luck. Although FHA loan limits were reduced on October 1, they are allowing streamline refinances of the former temporary higher loan limits.  UPDATE: FHA LOAN LIMITS FROM NOV 18, 2011 – DECEMBER 2012 ARE $567,500 IN KING, PIERCE AND SNOHOMISH COUNTY.

VA Mortgage Loans. Unlike conforming and FHA loans, VA elected to not reduce their loan limits (technically the guarantee) for the remainder of 2011.  

With mortgage rates at a historic lows, it may be worth your time to contact a licensed mortgage originator to review your options. Whether or not you should refinance depends on your personal goals and financial scenario.  If your home is located anywhere in Washington, I'm happy to provide you detailed written rate quotes with no obligation.

Filed Under: Fannie, Freddie and FHFA, FHA, Refinance, VA Mortgage Loans Tagged With: , , ,

VA Funding Fee to be Reduced Effective October 1, 2011 [UPDATED: NOT!]

September 21, 2011 by Leave a Comment

UPDATE: VA Funding Fees were only briefly reduced.

NOVEMEBER 8, 2011 UPDATE: VA Funding Fees are in a political tug-of-war. Per Circluar 26-11-17:

3. Possibility of Congressional Action.  VA believes it is highly likely that Congress will pass a bill keeping funding fees at their present level. 

Stay tuned. I was surprised to see that the fees were reduced when others are jacking fees up. 

VA mortgage loans that close on or after October 1, 2011 will have reduced funding fees except for IRRL (Interest Rate Reduction Refinancing Loan) transactions, which will remain unchanged at 0.50%.  A qualified Veteran with less than 5% down payment, using this benefit for the first time will see the funding fee drop from 2.15% to 1.40%. At a time when it seems many mortgages, like FHA and USDA, are increasing their mortgage insurance fees, it's nice to see VA do something that may have a positive impact.

Here is the VA Funding Fee table from Circular 26-11-12.

VAFundingFee

Also unlike conforming and FHA insured loans, VA is not restructuring their loan amounts.  In King, Pierce and Snohomish County, an eligible service person can purchase a home with zero down payment up to $500,000 with a VA mortgage loan.

If you are selling a home, be sure to consider VA buyers — especially considering that FHA and conforming loan limits are reduced.  VA loans are just as easy to close as a conforming loan.  Real estate agents, please don't steer sellers away from these transactions.  Why exclude any buyer in this (or any) market?

Filed Under: VA Mortgage Loans
« Previous Page
Next Page »