What happens between signing documents and closing? Watch this video featuring The Talon Group’s Chief Title Officer, Tim Daniels as he explains what happens with your loan documents after you finish signing at the escrow company.
A Solution for FHA Buyers Searching for a Down Payment
September 22, 2008 by Leave a Comment
DPA’s, such as Nehemiah, will no longer be allowed with FHA mortgages as of October 1, 2008 with the passage of HR 3221. Congress currently has legislation in the works to bring DPA’s back to life for those with better credit scores…but until that is successfully passed, DPAs are soon to be gone.
Buyers who are shy on down payment (or wish not to tap out their savings) can ask intermediate family members for a loan. Here are some of the FHA guidelines:
- The loan can be secured or unsecured against the subject property. No third parties.
- The loan must only be with immediate family (parent, stepparent, grandparent, child, adopted or foster child, etc.)
- The family member can borrower the funds for the loan–however, the loan must be between the family member (again, no third parties allowed).
- No balloon payments can be due within 5 years.
- Borrower must qualify for both loans (FHA mortgage and the family loan). Terms of the family must be submitted to underwriting.
- The combined loan to value (when you factor both loans) may exceed 100% of the sales price however, no cash back to the borrower is allowed (except for the earnest money deposit).
Sellers can still contribute up to 6% of the sales price towards actual closing costs and prepaids AFTER the borrower has met their 3.5% contribution towards down payment (this is where the family loan comes in). If the home buyer has not owned a home for the past 36 months, they may qualify for the First Time Homebuyer Tax Credit which could give them up to $7500 to pay back the family loan once they receive their tax refund.
Family members can still provide "gift" funds towards the down payment and closing costs as long as they do not expect repayment. Currently, the IRS permits up to $12,000 per person for an annual gift before gift taxes are to be paid without tax.
That’s Not Me: Numerous Matters and ID Affidavits from the Title Company
September 17, 2008 by Leave a Comment
If you have a common popular name, like Smith, Jones or Hernandez; you may be asked to complete a form from the title insurance company. This is so that instead of listing many judgments that are against the same name as yours on the preliminary title commitment, the Title Department and use the ID Affidavit to determine whether or not the items shown are against you. Tim Daniels, Chief Title Officer with The Talon Group, explains more in this video.
<<Video Deleted>>
Sadly when First American absorbed The Talon Group, the deleted many of their education and entertaining videos.
Declining Home Values: Good for Buyers – Bad for Refi’s
September 16, 2008 by Leave a Comment
Last Wednesday’s Seattle PI featured a front page article by Aubrey Cohen: Home values drop by double digits. According to data by the NWMLS, the median sales price for houses in August 2008 for Seattle was $464,800; a 7.8% drop from July 2008 of $428,500 and 14.5% drop when compared to the median sales price from August 2007 of $501,000. King County also dealing with a double digit drop. The median sales price for houses in King County in August 2008 was $423,950; a 4.7% drop in one month with July 2008 at $445,000 and a 11.2% drop compared to August 2007 at $447,345.
If you’re a home buyer in this market, you’re in the drivers seat…and sitting pretty at that. Listings are up 18.3% in King County (condos and houses) as compared to August of 2007; giving you plenty of choices. Sellers are more likely to contribute towards your closing costs and prices are more attractive than recent years.
What if you all ready own a home and you’re considering refinancing? Even though your home is your castle, the appraiser must use 3 recent sales (over the last 6 months is preferred) of homes similar to yours to come up with an appraised value. This can be a little tricky with fewer sales AND lower sales prices. Using the King County figures above and rates I’ve quoted at Mortgage Porter, this is how a refinance could be impacted:
Joe and Suzy purchased their home in King County for $447,345 in August 2007 utilizing a 30 year fixed mortgage at 6.625% with a loan amount of $357,900 (20% down payment). They are now interested in taking advantage of our lower rates and decide to refinance since rates are close to a full 1% lower with zero points and they’re going to stay in their home for at least the next five years. They have not paid additional towards their principal and their current balance is now around $354,250 with a principal and interest payment of $2,291.67.
An appraisal reveals that their home, based on what others like theirs have recently sold for, is now worth $423,950. The best priced rate/term refinance (assuming perfect credit) is an 80% loan to value. 80% of $423,950 is $339,160. If Joe and Suzy want to drop their rate by one point, they would need to bring in $15,000, not including closing costs if they want to avoid private mortgage insurance. (Second mortgages are now pretty tough to come by these days).
Joe and Suzy’s home may be worth more than average. Loan originators do not know what the value will be until we receive the appraisal. I do have some resources available (such as researching comps via the title company) however, it’s just a rough idea. Be wary of any loan originator who promises you that your home value will be perfect for a refinance.
Joe and Suzy’s options (if they want to refi) are:
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Bring in $15,000 plus closing costs (approx. $2600) to closing to pay down principal to 80% of present value. Principal and interest payment = $2,033.44 – based on 30 yr at 6.00% at 0 pts (apr 6.063). A savings of $258 per month, at a cost of $17,600, Joe and Suzy really need to decide if this is the best use of their money. Based on their monthly savings, they’ll break even in approx. 5 and a half years.
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Private mortgage insurance. Paying off the entire mortgage balance plus closing costs provides a loan to value of approx. 85%. Principal, interest and mortgage insurance based on 5.875% at 0.75% pts (apr 6.005) = 2,227.70. This is a monthly savings of $63.97. Suzy and Joe do not have to bring in $15,000 to pay down their principal, however it will take almost 7 years to break even on the cost of this refinance.
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Rates with LPMI (lender paid mortgage insurance) are not competitive for this scenario.
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FHA has monthly and upfront mortgage insurance. Unless their motivations are other than reducing their rate, this is not a valid option for this scenario.
Even if our local market has hit bottom, appraised values will be impacted for several months until home values begin to appreciate. Appraised values are a reflection of what has sold in the past. Appraised values may continue to trend lower for refinances.
Glenn Crellin, director of Washington Center for Real Estate Research at Washington State University states (from Aubrey Cohen’s article) regarding the recent drop in rates from the Fannie/Freddie takeover his expectation is:
"those decline in rates are going to be relatively short term."
And to those who are trying to get the "bottom" of the market for home prices, he says it’s "nearly impossible". Let’s face it, we really won’t know where the bottom is until prices are heading back up.
If you are considering refinancing, I do recommend that you contact your mortgage professional soon and "be real" about your home value. I don’t encourage waiting with median sales price declines at 4.7 (King County) to 7.8 (Seattle) per month as it’s eating away at your equity and refi options.
If you are considering buying a home, proceed with getting preapproved so you’re ready to make an offer should you find the home you’re looking for.
Related Post:
Just 10 Days Left to Sign Up for FREE Credit Monitoring
September 15, 2008 by Leave a Comment
Due to a settlement made by TransUnion (one of the "big three" credit bureaus) you have a limited time left to sign up for FREE credit monitoring. In this day and age of identity theft, I highly encourage that you take advantage of this offer. But you only have 10 days left to do so.
Anyone who has obtained any type of credit over the past 20 years is eligible for this benefit. For more information, please click here.
I signed up! Why not? I hope you will too.
Jennifer’s Sunset
September 13, 2008 by Leave a Comment
I learned yesterday that my former Sister in Law, Jennifer Witt, passed away the night before. I dedicate last night’s sunset to her.
Not only is she my son’s Aunt, Jennifer and I attended high school together and I’ve known her more than half my life. In fact for a few years, we were roommates, sharing an apartment with her brother (my son’s Dad). I think we were very close for the 10 years I was with my son’s Dad and we kind of drifted apart these past years. Not that we didn’t care for each other, we did very much, we just didn’t really get to see each other often.
Some of my favorite memories of Jennifer are playing pinochle (she was fierce) and I don’t know why I have a memory of us together stuck in my head of sharing some Asti Spumante and deciding to bake an apple pie from a tree she had in her yard. Smart, funny and beautiful; Jennifer was a spark plug.
She is missed and loved. I very sad she’s gone. My thoughts and prayers are with her and family.
Update: Here is information on Jennifer’s Memorial on Sunday, September 21.
Seven Years Ago Today
September 11, 2008 by 2 Comments
I’ll never forget it…nobody will. Seven years ago, my son (who had just turned 9) was getting ready for school and I was emailing clients with my AOL account in my home office in my home on North Lake when shots of horrifying photos began to appear on AOL. I really couldn’t believe what I was seeing. In fact, I thought it must have been a terrible promotion for a movie–it just couldn’t be true. Sadly, it was. I kept my son home from school that day, we watched the news unfold and just spent time with each other.
9-11 has forever changed our Country. My thoughts and prayers are with those who lost their lives from the events that took place seven years ago today.
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