Insanity

May 6, 2010 by 1 Comment

I'm working on renegotiating a locked rate for one of my clients.  The lender will allow us to do so if it meets specific criteria (price and rate must improve by a certain amount).   If I'm successful in obtaining a lower rate for my clients, I may potentially cause a delay in their transaction due to the Mortgage Disclosure Improvement Act (MDIA).  Most lenders interprets MDIA as any change in APR, for better or worse, of more than 0.125% for a fixed rate mortgage.

So I'm requesting an interest rate improvement of 0.125% because the transaction meets the criteria to do so.  If the lender approves the request, I am required to provide a new Federal Truth in Lending which will disclose the APR lower by 0.126%.  This will trigger a three day waiting period before my client can sign their mortgage papers at closing.  Luckily, the clock starts on the day of delivery (unlike the right of recession waiting period) and includes Saturdays.

Along with the Federal Truth in Lending, I am required to provide a revised Washington State's Loan Application Disclosure Form (no beef from me there) disclosing the change in interest rate.

Isn't it crazy that improving an interest rate for my client could possibly trigger a delay in closing? 

Filed Under: Legislation

Free Workshop for King County Marine Waterfront and Bluff Property Home Owners

May 1, 2010 by Leave a Comment

The King Conservation District is holding a series of free workshops for property owners along the marine shorelines and bluffs of King County.    The workshop will provide an opportunity to learn about the ecological, geological and vegetation management issues associated with owning a home located on marine waterfront or a bluff.

Topics will include:

  • Understanding marine near-shore and riparian ecology
  • Recognizing geologic hazards
  • Using native vegetation to reduce erosion and to improve fish and wildlife habitat

Who should attend:

  • Beach property owners interested in a stable natural shoreline
  • Bluff property owners interested in reducing the potential for erosion and landslides
  • Any marine shoreline or bluff property owner interested in improving fish and wildlife habitat.

When and where:

All workshops are from 9:00 am – 12:30 pm (indoor session) and 12:30 – 3:30 pm (optional pre-order boxed lunch $12 and field trip).

Facilitators:

  • Kollin Higgins, King County DNRP WLRD
  • Peter Landry, City of Normand Park
  • Elliott Menashe, Greenbelt Consulting
  • Brandy Reed, Conservation District

To register or for more information contact Brandy Reed at 425-282-1924 or brandy.reed@kingcd.org

Filed Under: Events, Real Estate, Seattle

Poll Results: How Would You Like Your Mortgage Originator Compensated?

April 30, 2010 by Leave a Comment

Surveysays

Our poll is over and I’m actually a little surprised by the results: a majority prefers the current most common form of mortgage originator compensation.

Points, based on a percentage of the loan amount received 48.9% of the vote.   Followed by hourly, based on work performed, at 31.1%.  Paying your mortgage originator a flat fee, the same fee for everyone, came in last at 20%.

I hope the FED and Washington State’s DFI reads this… right now they’re both trying to change how mortgage originators are paid. 

Shouldn’t it be up to the consumer?  They have the right to vote with their feet.  If they don’t like how a mortgage originator feels they should be compensated, they can walk.

Our government getting involved with how an industry is paid is very troubling to me.  

Your thoughts?

Filed Under: Polls Tagged With: , ,

How to Buy a Seattle Home with $10,000

April 28, 2010 by 2 Comments

NOTE: Mortgage rates quoted in this post from April 2010 are outdated and no longer valid. For a current mortgage rate quote for a home located anywhere in Washington, please click here. Also, other programs available since this post was published. 

I recently had someone getting ready to buy their first home ask me if $10,000 would be enough for a down payment.  If she had served in the military, she could possibly qualify for a zero down VA loan; this was not an option for her.  USDA loans also offer 100% financing but the area she’s considering is not classified as rural. 

An FHA loan will currently allow her to buy a home with as little as 3.5% of the sales price.  Until this summer*, sellers can contribute up to 6% of the sales price towards allowable closing costs and prepaids (*in a few months, this will be reduced to 3%).

So how much with $10,000 buy?  How about a sales price of $285,000.   Here’s how that pencils out.

$285,000 x 3.5% required minimum down payment = $9,975.  This is the buyers minimum required investment if utilizing an FHA insured loan.   A parent can gift funds towards this amount, but the seller cannot.

The rate (as of writing this post 4/28/2010) for an FHA insured 30 year fixed mortgage is 5.000% assuming we’re closing in 30 days (APR 5.620) and priced with zero points to help keep the closing costs down.   Pricing the loan with zero points means that you’re asking the seller to contribute $2,750 less than they would if your rate was priced with a point (1% of the loan amount).  This may make your offer more acceptable.

Based on this scenario, if the Seller contributes $5,500 towards allowable closing cost and prepaids, you’ll wind up needing approximately $10,000 for your down payment and remaining closing costs.

I did use 6 months for property taxes, which will vary depending on when your first mortgage payment is due.  And I used 15 days of prorated interest which is based on closing in the middle of the month.   Closing towards the end of the month reduces the prorated interest (your cost)…of course the trade off is that you don’t own the property until it’s closed.

The total monthly payment, including PITI and mortgage insurance, is going to be around $2,000 (depending on interest rate, taxes and home owners insurance).  My scenario has a payment of $1981.  

In addition to your down payment, you may be required to have reserve funds after closing of at least two months proposed mortgage payments.  Based on this scenario, that would be around $4,000 in the bank (stocks, 401k, etc) after closing. 

Also of note, your first payment will not be due until the month after closing unless you close on an interest credit.  This is a great opportunity to “pay yourself” by putting that mortgage or former rent payment into your savings account.  Owning a home does come with expenses…some not always planned.

If you are interested in buying a home located in Washington state, I’m happy to help.   Please contact me or apply on-line by clicking the tab at the top this page.

Filed Under: FHA, First Time Home Buyer, Residential Purchase Tagged With: ,

Can I Convert My Existing Home to an Investment Property to Buy My Next Home?

April 27, 2010 by 13 Comments

EDITORS NOTE: These guidelines have changed. If you’re buying a home in Washington state, please contact me for current guidelines.

This is a common question I’m asked these days…mostly because many home owners don’t have as much equity as they would need in order to sell their current residence.  With home prices being at their lowest in years, many want to take advantage and buy their next home and simply rent out their current residence.

[Read more…]

Filed Under: Fannie, Freddie and FHFA, FHA, Investment Property, Residential Purchase, Underwriting and Qualifying, USDA Tagged With: ,

FHA Financing Not Available on a Listing? BIG MISTAKE

April 25, 2010 by 3 Comments

Someone recently landed on my blog by entering the phrase:

Why are so many homes not FHA approved?

It's an interesting question.  I'm assuming the person doing the research on the internet is a home buyer and that they're looking at a stand-free home and not a condo…pure assumption on my point.  (If it is a condo, that's another story).

I'm wondering if the person is finding that sellers are not promoting that they will accept FHA financing on their listed homes…which is a huge mistake.

FHA loan amounts in the Seattle and Bellevue area goes up to $567,500 for a single family dwelling and currently allows a down payment as low as 3.5%.   FHA is also more flexible with credit and some underwriting guidelines.

FHA loans are more popular than ever with the ever tightening guidelines and risk based pricing that conventional loans have.  Many of my FHA home buyers are putting down more than the minimum required investment of 3.5%. 

Some might be selecting FHA for their purchase because they're converting their existing home to a rental property and FHA does not have the same reserves conventional guideline requiring 6 months of mortgage payments (PITI) for EACH property owned (or buying) if the converted home has less than 30% equity (which is often the motivation for turning the home into a rental).

Some select FHA financing because they plan on selling their home in the future and are hedging that mortgage interest rates will be higher in the future.  They know that their current low rate FHA mortgage may be assumable to a future buyer in a higher rate environment.

I've had well established clients opt for an FHA mortgage because FHA treats alimony payments different than conventional financing.

FHA is not the same mortgage that it was a few years ago.  At the end of 2005, appraisals became more "common sense" allowing minor conditions to exist, focusing  more on the safety and soundness of the property.  FHA appraisals are very similar to conventional these days.

FHA transactions do not take longer to close nor are their higher closing cost for the seller than a conforming loan

My point is, there are many reasons sellers should accept FHA financing.  If a seller or real estate agent is steering away from an FHA approved buyer, they're really reducing the potential of excellent buyers for their home.

Filed Under: FHA, Real Estate Agents, Residential Purchase Tagged With: , ,

Friday Funny: The Life of a Title Rep

April 23, 2010 by Leave a Comment

Since I was a “title rep” in my former career, I found this video sadly amusing.

Filed Under: Just for Fun, Title Insurance

Seattle Area Rent vs Buy Ratio

April 22, 2010 by Leave a Comment

Chris Lodge, Property Information Manager at The Talon Group double checks some stats that the NY Times have came up with regarding home ownership in the Seattle area which is being picked up by the media.   From Chris: 

I've long championed the idea that local news and data is more valuable than what the national news gives us.  So when a client of mine sent this New York Times article over to me, it definitely piqued my interest.  The headline , "In Sour Home Market, Buying Often Beats Renting", is a great attention grabber for sure. 

Do they believe that Seattle is a good place to buy?

Chris has done some research on his own which provides different stats, read his article and data on Talon Blog by clicking here. 

If you would like a free rate quote, to compare to what you're paying in rent, for a home in Washington, click here.

Filed Under: Residential Purchase, Title Insurance
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