USDA Zero Down Financing Available in King, Pierce, Kitsap and Snohomish Counties

May 6, 2011 by 4 Comments

12/10/11 EDITORS NOTE: Like many mortgage programs, some of the guidelines and features to USDA loans have changed since the original publishing of this post.  This is a good thing to keep in mind whenever researching mortgages on-line.

USDA Guaranteed Rural Housing loans are administered through the USDA to provide financing in areas that are designated as “rural” for families under certain income limits.  Qualified borrowers can purchase a home in a USDA approved area with 100% financing and if the appraised value is higher than the sales price, the home buyer can actually finance their closing costs too (USDA will consider the higher of the two).  It’s a pretty sweet deal for the right home buyer.

Program highlights:

  • 103.5% financing based on the appraised value
  • 30 year fixed rates with government pricing
  • No monthly mortgage insurance.  There is a one-time guarantee fee (similar to a VA funding fee or FHA upfront MIP) of 3.5% which is financed into the new loan.
  • No down payment or first time home buyer requirements
  • 29/41 debt-to-income ratios (exceptions available with compensating factors)
  • Closing costs may be financed into the new USDA mortgage (based on appraised value).
  • Seller contributions allowed for all closing costs and prepaids
  • Gifts from disinterested third parties allowed
  • Primary residence (owner occupied) only
  • Home buyer may not own other adequate housing
  • Single family dwellings or HUD approved condos
  • Subject to household income limits.  Currently (5/6/11) in King County and Snohomish County, the income limits for a 1-4 person household is $92,600 and 5-8 person household is $122,250.
  • No loan limits (income limits factored with debt-to-income ratios will create a loan limit for each specific scenario).
  • Escrow hold backs for repairs allowed up to the lower of 10% of the loan amount or $10,000.

As I write this post, a majority of Washington State qualifies for this government backed program, including Bonney Lake/Lake Tapps, Enumclaw, parts of Maple Valley, North Bend, Duvall, Bainbridge Island, Vashon Island and Gig Harbor.   Click here to see if a specific property is eligible.

EDITORS NOTE: Rates posted below have been EXPIRED for YEARS!!!  Please click here for a current mortgage interest rate quote.

Let’s compare FHA and USDA financing to would look like for a qualified home in Fall City with a sales price of $350,000 utilizing a 30 year fixed rate with 720 mid-credit scores and with the seller paying closing costs and prepaids:

USDA

  • Current rate: 4.375% (APR 4.820)
  • Mortgage payment (excluding property taxes & home owners insurance): $1,808.66
  • Down payment required: $0

FHA

  • Current rate: 4.250% (APR 5.189)
  • Mortgage payment (excluding property taxes & home owners insurance):  $1,999.34
  • Down payment required: 3.5% = $12,250 (may be gifted by family member)

The USDA mortgage payment payment is $190.68 less per month and cash needed for down payment is $12,250 less than the FHA scenario.

If you are considering buying a home located in a rural community that qualifies, USDA financing could be a prime choice!

If you would like more information about buying or refinancing your home located anywhere in Washington, please contact me.  I’m happy to help!

NOTE:  areas below that are not orange are currently eligible for USDA financing!

USDA_001

 

Filed Under: USDA

Student Loans: Subprime Financing of the Future?

May 4, 2011 by Leave a Comment

My son is getting ready to start college this fall and although I've done my best to plan and save to help out for his education, I'm not able to foot the entire cost. Like many parents, the 529 I've been religiously plunking away at was butchered when our markets crashed… I've continued plunking every month to this account but it's really a drop in the bucket. I'm very proud of him and he has earned a nice academic scholarship that will help go towards the expense.  He's going to have to take out some student loans and it's something I'm not thrilled about. 

I recently watched a show on CNBC about the student loan crisis and it has me very very concerned.  It's appalling how much it smacks of the subprime crisis.  Some of the stories on the show revealed how predatory some of the student loan companies and some colleges can be when they have a young student wanting "the American dream" and I'm not talking about home ownership, I'm referring to a college education.  Many justify the huge expense because payments are deferred and they believe they'll graduate with employers knocking down their doors.  Some students use their student loan money to buy pizza, beer…even go on a shoe shopping spree.  I understand that students need money for food, but should this be financed?  If they are receiving "student loan money" for essential food, should they only be allowed to use credits on campus?   I'm rambling….

I plan on sharing some of my personal thoughts, experiences and opinions as I venture down this road with my son.  I'll also address how student loans can impact borrowers when they on obtaining a mortgage: first time home buyers.

Any tips from parents of college grads?

Filed Under: Financial Planning

25 Years Ago Today

May 1, 2011 by Leave a Comment

Hard to believe that 25 years ago, I began my career in real estate at Safeco Title Insurance in Seattle.  It was a fluke that I wound up in the title insurance industry. Unsure of what I wanted to do for my career and needing an income, I went to the local Business Careers in Renton and they found my new job at Safeco Title (which was merged with Chicago Title Insurance Company).  My first day was May 1, 1986. Don't worry, I'm not going to bore you with the 14 year history of my career in title insurance and escrow industry or my eleven years as a mortgage originator at Mortgage Master Service Corporation.   This is just a little sentimental moment reflecting back on all of my years I feel fortunate to have been a part of such a fascinating industry.  

Seahawks 

I'm looking forward to my next 25 years in mortgage and real estate!   And yes, that really is the former coach of the Seattle Seahawks, Chuck Knox, and those are real Seahawks uniforms.

Filed Under: Current Affairs

Preapproval Letters Defined and Updated

April 29, 2011 by Leave a Comment

This is an update from a post I wrote back in early 2007 about preapproval letters. So much has changed in the mortgage industry in the past few years that I thought it was worth refreshing this post with updated information.

The preapproval letter is a tool typically drafted by a loan originator to be used by a buyer’s real estate agent when presenting an offer on a property.   The letter may be in the form of a certificate or be an actual letter on the lender’s letterhead.   The preapproval letter is intended to assure the seller and the listing agent that the buyer has been buyer has been approved by the lender and therefore accepting an offer from this buyer, there should ideally not be any financing issues with the buyer.

When I prepare a preapproval letter, it usually contains the following (depending on the program):

  • Effective dates (the date the letter was written) and expiration date.
  • The borrower’s names (who is approved for financing).
  • The sales price and loan amounts they are approved for.  
  • Maximum mortgage payment (including any home owners association dues) the borrower is qualifed for.  NOTE: this is very important when we're in an environment where rates may rise quickly.
  • The type of financing is confirmed (ex. Conventional, FHA, VA, USDA, etc.)
  • Credit has been reviewed.
  • Employment and income has been confirmed.
  • Down payment and funds for closing (closing costs, prepaids and reserves) are verified.
  • Any closing cost that are being requested to be paid for from the seller.
  • Any item the preapproval is subject to (such as satisfactory appraisal, title, complete purchase and sale agreement, etc.).
  • Mortgage originators name and contact information.

If these items have not been actually verified with proper documentation, then a buyer has been prequalified—not preapproved.  BIG DIFFERENCE.  Being prequalified essentially means that a verbal interview has been conducted without providing all of the necessary supporting documents (pay stubs, W2s, bank statements—again, depending on the type documentation required for the specific loan “full doc” to “no doc”).  A Good Faith Estimate does not constitute a preapproval.

The preapproval letter does not contain private information such as a buyer’s credit score or their additional assets.   It is a sales tool for the buyer’s agent and if there are multiple offers presented on a home, having a strong preapproval letter is an advantage.   This is one reason why it is crucial for buyers to become preapproved before they begin shopping for their next home.   Many listings agents will not even consider an offer unless the buyer has been preapproved.    

The preapproval letter is generally effective a specific amount of days, depending on when supporting documentation is set to expire (such as the credit report).  Updating a preapproval letter is simply re-running the credit and possibly obtaining most recent income and asset documentation (paystubs and bank statements).    On occasion, the buyer’s agent may request a revised preapproval letter if they are presenting an offer on a home that is priced for less than what the buyer is approved for and if they are asking for closing costs.  It's not uncommon for me to issue several preapproval letters for a home buyer based on different homes or offers they are presenting.

Real estate agents may also consider who the preapproval letter is from, and they may contact the lender to confirm the buyer is indeed prepproved and not just prequalified.   Many agents will tell you that the preapproval letter is only worth the paper it’s printed on.   This is also why it’s very important to be selective with lender you work with…it could possibly impact whether or not your offer is accepted on your next home.

I highly recommend starting the process early (6 to 12 months before you're planning on buying) just in case there are unknown credit or down payment issues.  I can also prepare preapproval letters on weekends as long as I have been provided all of your supporting documentation.   If you're considering purchasing a home located anywhere in Washington state and need a preapproval letter, I'm happy to help you!   

Filed Under: Residential Purchase

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.

[Read more…]

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

This Week Could be a Doozie for Mortgage Interest Rates

April 25, 2011 by Leave a Comment

In the past, I've included the scheduled events that may impact mortgage interest rates in my rate weekly rate post.  However, this week is so packed data that I thought it was worthy of a post all its own.  Check this out (items that are bold tend to be the may be the most influential to rates):

Monday, April 25:  New Home Sales

Tuesday, April 26:  Consumer Confidence

Wednesday, April 27:  FOMC Meeting and Durable Goods Orders

Thursday, April 28:  Gross Domestic Product, Initial Jobless Claims, GDP Chain Deflator and Pending Home Sales.

Friday, April 29:  Personal Consumption Expenditures and Core PCE, Employment Cost Index, Chicago PMI and Consumer Sentiment Index (UoM).

Wednesday, we'll learn if the Fed's interest rate decision and possibly gain clues as to their plans with QE2.  Ben Bernanke is going to be having a news conference following the FOMC meeting which many will be tuned into hoping for clarity on his views of the direction of our economy.  You can see the entire week offers plenty of data to be digested.  

Remember, mortgage rates are based on mortgage backed securities (bonds) and are not set by the Fed.  Mortgage rates may are impacted by how MBS are being traded on the bond markets.  When the stock market is rallying or there are signs of inflation, mortgage rates tend to raise higher.  When the stocks are tanking, investors will often seek the safety of bonds which will cause rates to move lower.

Whether or not you should lock or float (not lock) your interest rate depends on your personal risk tolerance.  My general stance is that if you like the rate that is currently available – you should consider locking.  Decide which scenario is worse for you: losing today's rate by not locking or locking todays rate with a rate drop tomorrow.  Please discuss this with your local mortgage professional.  I am a NMLS Licensed Mortgage Originator dedicated solely to Washington State.    If you are interested in a mortgage for a home located anywhere in Washington State, I am happy to help you.

NOTE:  I plan on posting mortgage interest rates today.  Stay tuned!

Filed Under: Economy, Events, The Fed - FOMC

Happy Earth Day

April 22, 2011 by Leave a Comment

When I'm not helping people with financing to refinance or buy their next home or investment property, I love to spend time in my garden.

DSC_0112 
Check out this hummingbird who decided to take a break in one of the cherry trees in the front yard of our Seattle home.

How are you celebrating Earth Day?

Filed Under: Current Affairs

Survey Says: How Consumers Select their Mortgage Originator

April 20, 2011 by 4 Comments

A few weeks ago, I posted a survey with three questions to learn consumers opinion about the Fed's rule on loan originator compensation and how they select their loan originator.  Here are the results.

Please rate the following based on how you will select your next mortgage professional:

  • Years of experience as a mortgage originator (72.7%)
  • Referral from someone you trust (63.6%)
  • I will return to the LO who helped me with my last mortgage (62.8%)
  • Whoever quotes the lowest rate (45.5%)
  • Type of institution (bank, correspondent lender, broker or credit union). (38.6%)

When I'm helping someone with a mortgage for a home located in Washington state, I find that a majority of my new clients are readers of my blog.  I'm also fortunate that many of my clients are referred to me from real estate agents and financial planners.  Home owners I have helped in the past also tend to refer their friends and family and return to me for their next.  I do not advertise (with the exception of my tiny ad on West Seattle Blog), I do not take "up calls" and I do not buy leads…never will.

Thank you for reading my blog and for remembering me when you or someone you know needs a mortgage for a home in Washington.  I feel so fortunate to have my business model where consumers seek my professional advice and assistance with their home loans. 

Filed Under: Polls
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