FHA Minimum Down Payment Increasing January 1, 2009

August 13, 2008 by 4 Comments

With the passage of HR 3221, the minimum required investment of a home buyer utilizing a FHA insured mortgage is increasing from roughly 3% to 3.5% effective January 1, 2009.  You may think this sounds like small change, but with larger loan amounts, this adds up.

For example, if a home buyer is utilizing a FHA Jumbo and they are buying a home priced at $500,000.   Their current minimum required down payment of 3% is $15,000.  Effective January 1, 2009, the minimum required down payment of 3.5% is $17,500; a difference of $2,500 for the amount required to invest into the transaction.   With a home priced at $300,000; the current required investment from the buyer would be $9,000.  As of January 1, 2009, the new amount required will be $10,500.

What does this mean to you?

If you are planning to buy a home utilizing a FHA insured mortgage, be aware of the changes to the minimum down payment requirements.   After December 31, 2008, you'll be required to come up with additional funds towards your down payment which may be a gift or loan from family members.

If you are wanting to take advantage of the lower down payment requirement, meet with a Mortgage Professional who is qualified to provide FHA loans (not all loan originators are, you can check HUD's site to verify).

If you would like me to provide la rate quote for a FHA mortgage on a home located anywhere in Washington, please click here.

Editors Note: this post wass been modified to correct the effective date.

Filed Under: FHA, Jumbo/Non-Conforming, Legislation, Residential Purchase

Conforming/FHA Jumbo Limit to Decrease January 1, 2009

August 12, 2008 by Leave a Comment

November 7, 2008 Update: FHFA has announced the new conforming jumbo loan limits for 2009 which are based on a lower median home price than used here (which was 2008’s limits).  Based on these figures, a single family unit will be $506,000 for King, Pierce and Snohomish Counties.  Read more here.

Recent legislation, HR 3221 included what the new conforming loan limits will be.  Our conforming-jumbo limits will be rolled back slightly to the following effective for all mortgage loans not closed December 31, 2008.   Here’s what the new limits will be effective January 1, 2009 (based on HUD’s current median home prices at the time of this post):

King, Pierce and Snohomish Counties:

Single Family:  $506,000 $522,100 ($567,500 until 12/31/2008)

Two Family:  $668,350 ($726,500 until 12/31/2008)

Three Family: $807,850 ($878,150 until 12/31/2008)

Four Family: $1,004,000 ($1,091,350 until 12/31/2008)

Kitsap County:

Single Family:  $437,000 ($475,000 until 12/31/2008)

Two Family:  $559,450 ($608,100 until 12/31/2008)

Three Family:  $676,250 ($735,050 until 12/31/2008)

Four Family:  $840,350 ($913,450 until 12/31/2008)

San Juan County:

Single Family:  $546,250 ($593,750 until 12/31/2008)

Two Family:  $699,250 ($760,100 until 12/31/2008)

Three Family:  $845,250 ($918,800 until 12/31/2008)

Four Family: $1,050,500 ($1,141,850 until 12/31/2008)

Clark and Skamania Counties:

Single Family: $417,000 ($418,750 until 12/31/2008)

Two Family:  $533,850 ($536,050 until 12/31/2008)

Three Family:  $645,300 ($648,000 until 12/31/2008)

Four Family:  $801,950 ($805,300 until 12/31/2008)

Jefferson County:

Single Family:  $417,000 ($437,500 until 12/31/2008)

Two Family:  $533,850 ($560,050 until 12/31/2008)

Three Family:  $645,300 ($677,000 until 12/31/2008)

Four Family:  $801,950 ($841,350 until 12/31/2008)

Watch for my follow up post on what this means to you.

Read my related articles on HR 3221:

First Time Home Buyers Tax Credit

Down Payment Assistance Programs Days are Numbered

Filed Under: FHA, Jumbo/Non-Conforming, Legislation, Mortgage, Refinance, Residential Purchase, Seattle

Down Payment Assistance Programs Days are Numbered

August 11, 2008 by 6 Comments

With the passing of HR 3221, Down Payment Assistance Programs will no longer be allowed with FHA mortgages as of October 1, 2008.    DPA’s such as Nehemiah, have been popular for helping home buyers come up with their down payment.  FHA allows Sellers to pay for closing costs and prepaids as long as the buyer has met their minimum required investment (which has also changed with the passing of HR 3221–another post will follow on this subject).   With DPAs, the seller contributes funds to the DPA (like Nehemiah) which is a "charity" (they collect a small fee from the seller which is used for charitable causes).   The DPA then contributes the funds towards the down payment for the buyer.

Section 2113 of HR 3221 states that down payments for FHA insured mortgages may not come from "the seller or any other person or entity that financially benefits from the transaction" or "any third party or entity that is reimbursed directly or indirectly".  This applies for new loan applications on or after October 1, 2008.

Family members can still contribute towards the down payment on FHA insured mortgages.  In fact, Section 2113 of HR 3221 allows family members to loan up to "100% of the appraised value of the property plus any initial service charges, appraisal, inspection and other fees in connection with the mortgage".   The borrower must qualify for both mortgage payments (the first mortgage-FHA insured at 96.5% of the appraised value and the second mortgage from the Bank of Mom and Dad for the remainder).   This may make family members more comfortable with helping out with down payments as it will not be treated as a gift and the loan is documented, terms would be clear and recorded as well as secured against the property as collateral.  (Hopefully the Bank of Mom and Dad never have to foreclose).

What does this mean to you?

If you’re considering buying a home with minimum down payment, your family can gift or finance the 3.5% required investment of the buyer for FHA insured financing.  However, if you’re family not in the position to do so or if you don’t want to ask the Bank of Mom and Dad, then you have limited time to take advantage of the Down Payment Assistance Programs.

If you’re hoping to use a down payment assistance program to purchase your next home, you have just over a month to do so.  Meet as soon as possible with a qualified Mortgage Professional who can help you become preapproved with an FHA insured mortgage (NOTE:  not all lenders are approved to do FHA loans).  You must be credit approved prior to October 1, 2008 (and the closer we approach that date, the busier FHA approved lenders will be trying to beat the deadline).

Of course, DPAs are going down kicking and screaming to stay alive.  At this point, the countdown to the demise of DPAs is clicking away.

Update: 9:30 am August 11, 2008.   I’ve just received notice from one of the banks that we work with are no longer allowing DPAs.   This serves as a good reminder that lenders may have their guidelines that overlay government requirements.

Related posts on HR 3221:

First Time Home Buyer Tax Credit

Filed Under: FHA, Legislation, Residential Purchase

A Sunday Drive to Healdsburg, Sonoma County

August 10, 2008 by Leave a Comment

As you may know, I was in San Francisco last month for the Inman Connect real P7250157estate  conference.  I decided to add a few days to my trip and make the most of my air fair expenses by visiting Sonoma…specifically Healdsburg.  I know this isn’t quite a "neighborhood tour" like I’ve been promoting at Mortgage Porter…I’m hoping you’ll enjoy this post all the same.

It was a lucky fluke that we wound up based in Healdsburg, which is just north of Sonoma.  Sonoma is a nice town but if you want to really see wineries and enjoy a small town atmosphere, head north and you’ll be in P7250162 the heart of the Russian River wine region.  Dave Savage of the Mortgage Coach provided us with some excellent recommendations which I’ll share with you too.  (I may abbreviate: DSR = a "Dave Savage Recommendation").

An inexpensive (compared to other places in Sonoma county) place to stay is the Best Western Dry Creek Inn which is located right on Dry Creek Road and Highway 101.  Breakfast comes with the room but I suggest heading out to the Flying Goat Coffee for your morning jolt of caffeine.  Dave says they serve the world’s best cappuccino.

We also enjoyed an incredible breakfast at Costeaux French Bakery which has been a part of this town since 1923.   You need a nice breakfast if you’re going to start your day early with wine tasting!P7250113

In the town of Healdsburg, we found some wonderful wineries and tasting rooms.  Two of my favorites are:

  • Williamson Wines.  Bill Williamson pairs his wine tastings with food.  It’s an amazing experience.  Imagine having a piece of cheese with a bit of pickle on top paired with a sip of Chardonnay.
  • You also must visit Seghesio Family Vineyards on of the oldest in Healdsburg…they have great wine too.  (Thanks DSR).

Dave Savage had spot on recommendations for places to dine in Healdsburg.   For dinner, he recommends (and I agree):

Ravenous.  Located next to the town theater on North Street.  This is a cozy restaurant that you may need reservations for.  We had the ribs and flank steak. (DSR)

Bistro Ralph.  We shared a steak served on a pile of the tiniest french fries topped with a dollop of horseradish.  Reservations are a must. (DSR)

P7260186Driving north on Dry Creek Road, you can catch a concert on Friday evenings at Mazzocco Wines.   Pack a picnic and they’ll happily uncork one of their nice wines for you to enjoy on the lawn.   Passalacqua Winery and Unti are also a "must stops".   Many people recommended Bella Vineyards and Wine Cave, which is beautiful; however, when we were there, it’s was also packed with tour buses…Preston Vineyards was a welcome break from the crowds where no groups over 8 are allowed.   At the end of Dry Creek Road, you’ll find Lake Sonoma and Sbragia Family Vineyards which not only boasts amazing views, they also have fantastic wine.

Healdsburg has amazing wines and I’m just touching the surface.  Watch for another post for the rest of our excursion to Sonoma County soon.

Filed Under: Sunday Drive - Neighborhood Tours

Please Help Angie fight Breast Cancer

August 9, 2008 by Leave a Comment

Angie wants to walk in the Breast Cancer 3-Day event but needs to raise $2,200 or she will not be allowed to participate.  Angie is walking for her Aunt Em and so far has raised just over $500.  She has a ways to go to make the required amount to participate in the walk.   And does it really matter to us who she’s walking for?  We don’t know Aunt Emily and you may not know Angie.  We do know people who are fighting breast cancer.  I  personally lost a dear friend and co-worker this past year.  I’ve lost family members.  We have all lost someone to breast cancer.  Here is a woman who wants to do something by walking for 3 days (60 miles, I believe) and needs help in order to do so.  Breast cancer touches all of us.

Please consider making a donation for towards breast cancer and to allow her to walk for her Aunt Emily and for all of us.  Donate what ever you can.  For more information, or to donate, please click here.

THANK YOU!

Filed Under: Charity

First Time Home Buyer Tax Credit

August 6, 2008 by 41 Comments

Update February 17, 2009:  The American Recovery and Reinvestment Act has modified this tax credit posted here.  If you're a first time home buyer who purchased January 1, 2009 – December 31, 2009; click here.  If you purchased from April 9, 2008 – December 31, 2008; this post still applies to you. 

Please check with your CPA or tax advisor to see how this impacts you.

With the recent passage of HR 3221, people who have not owned a home for the lastUnclesam  3 years may qualify for an interest free loan from Uncle Sam of up to $7,500. Here's a quick skinny on how this works:

First time home buyers may receive a tax credit of up to 10% of the purchase price of the home (not to exceed $7500).   This is a "tax credit" meaning that you receive the credit (if you want it) after you file your income taxes.   For example, this means that when you file your taxes in 2009 and you owe $5,000 to Uncle Sam and you qualify to have a tax credit in the amount of $7,500; you would receive a refund of $2,500.   However, this is a refundable credit (aka interest free loan) that must be paid back each year to the IRS (when you file your taxes) over the next 15 years.

If you sell your home before the tax credit is repaid to Uncle Sam, then the full amount is due or if your property that you received the tax credit for is no longer your primary residence (i.e. you convert your home to a rental).

This credit does not apply if the first time home buyer is buying a home from a relative.

This tax credit is only available for purchases made between April 9, 2008 and July 1, 2009 for adjusted gross incomes of up to $75,000 ($150,000, if married, filed jointly) and phases out up to $95,000 ($170,000, if married, filed jointly).

Should you take advantage of this opportunity? 

Sure!  Who wouldn't want a $7,500 interest free loan?  Two things I would consider using this credit for if I were a first time home buyer:

  • investing into an interest bearing savings account to build my "emergency fund".
  • pay off a nasty high interest credit card (freeing up a monthly cash flow).
  • fund your IRA.

Just understand that this is essentially an interest free loan.  This is not "down payment assistance".  You will be paying this back over the next 15 years (or sooner if you sell, rent out the property or convert it a second home)…but you just can't beat "interest free".

For more information, click here.

Friendly reminder:  I am not a tax professional, I am a Mortgage Planner assisting families who need mortgages in beautiful Washington State.   Always consult with your CPA, financial or tax advisor.

Watch for more posts on the effects of HR 3221.

Filed Under: First Time Home Buyer, Legislation, Residential Purchase

Local Title Company Raises Rates 30%

August 4, 2008 by 9 Comments

Normally this wouldn’t be big news…but when Northpoint Title decided to drop their rates well below market and agressively try to pull existing title orders from other companies only to raise their rates one month later, I think it’s worthy some attention. Here’s an example of an email from a Northpoint rep to a real estate agent (dated June 16, 2008):

"Just checking in to see what you thought about the new title rates.  Can you believe we are 28% lower??  This is fantastic!   Here is a price comparison on an average sales price of $275,000:

Fidelity/Chicago: $840.00

FATCO/Talon: $840.00

OUR RATE:  $605.00

This is a big difference in the bottom line for your clients.  Let me know if you have any titles  you would like me to pull over.  I would be thrilled to help you out!"

Northpoint is a Landamerica "venture".  This email excludes the other local Landamerica title companies (which represent 25% of the total resale market in King County alone), Commonwealth of Puget Sound and Rainier Title who’s title rates (at the time) were 33% higher than Northpoint at this price point.

This tactic was used an attempt to gain title business on existing transactions without any regard to what was negotiated in the purchase and sale agreement.   Not to mention the effort or cost involved in producing the all ready provided title commitments. 

Northpoint justified their deep rate cut because they were a "green" title company, promoting being paperless which many title companies are (this is not unique).  From a separate Northpoint email dated June 16, 2008:

"I have some good news!  Northpoint’s paperless workflow system has effectively reduced our waste and costs, resulting in tremendous costs savings.  To help consumers in today’s challenging real estate market, we ahve decided to pass this savings on to your clients.  We filed new, lower rates with the Office of Insurance Commissioner and the rates became effective on Tuesday, June 10th…Please pass along this good news to your clients.  I look forward to working with you."

On July 7, 2008, Northpoint suddenly was not green anymore nor were they planning on passing any savings along to consumers.  Just shy of one month, they filed a rate increase following their huge marketing blitz all based on rate.  Presentations were being made to offices promoting the low rates even after the new higher rate was filed with the State.

Effective August 1, 2008, Northpoint’s rates are the same as Commonwealth of Puget Sound and Rainier Title.  They are 33% higher than what they’ve been pushing (and pulling) over the past month.   They are in line with the other title companies rates.

Title rates are not changed on a whim.   If you’re a long time reader of Mortgage Porter, you know that my background is title insurance and escrow and that my husband is in the title industry.   As a former manager, I can tell you that title rates are discussed and studied several weeks if not months.   Not to mention the time and effort it takes to file rates with the State.  (Washington title rates are public record, filed in Olympia).

In my twenty+ years in the real estate industry, I have never witnessed a title company use what appears to be bait and switch.      

 

Filed Under: Title Insurance

My Noisy Neighbors

August 2, 2008 by 2 Comments

These Barn Swallows moved in next door and are chirping up a storm.  I think they are sweet tweet.

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Filed Under: Just for Fun
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