How much home do I qualify for with a $70,000 down payment?

January 24, 2013 by Leave a Comment

I’m working with a couple in Seattle who would like to buy a home. They have excellent credit (scores of 740 or higher) and are planning on using $70,000 for their down payment and closing cost. They want to know how much home they can buy based on their down payment.

The following rate quotes are effective as of January 24, 2013 at 12:20 pm. Rates change constantly, for your personal rate quote for a home located in Washington state, click here.

Conforming High Balance allows them to buy a home priced at $576,000.

The conforming loan limit in Seattle/King-County is currently $506,000. Using a conventional mortgage, they could buy a home priced at $576,000. 

Current mortgage rates for a 30 year fixed conforming high balance ($417,001 – $506,000) based on this scenario is 3.750% (apr 4.094).  

3.750% is priced as close to “par” as possible meaning there is as little rebate credit or discount points priced with the interest rate. We could adjust the rate slightly higher to create more rebate credit to help pay for closing cost or we could reduce the rate by paying more in discount points. 

The loan to value based on a sales price of $576,000 and loan amount of $506,000 is 87.874% which means the Seattle home buyers will have private mortgage insurance (pmi). For this client, we’re opting to include the pmi in their mortgage payment instead of paying it as an upfront additional closing cost or doing “split premium” mortgage insurance.  

The principal and interest payment is $2,343.36 plus private mortgage insurance of $282.52 gives us a “PIMI” payment of $2,625.88. Property taxes and home owners insurance are additional.

The Seattle home buyers will negotiate the seller paying for remaining closing cost and prepaids/reserves estimated at $7900, leaving their amount due at closing very close to $70,000.  If the sellers opt to not pay for closing cost and prepaids, the buyers can use rebate pricing (slightly increasing the mortgage rate) to offset the cost.

FHA allows them to buy a home priced up to $637,500.

FHA mortgages in the Seattle/King County area have a loan limit of $567,500. With a down payment of $70,000 they could buy a home priced up to $637,500. The big difference between FHA and conventional financing is the mortgage insurance. FHA has both upfront and monthly mortgage insurance. 

The current mortgage rate I’m quoting for their FHA scenario is 3.375% (apr 4.059%).

This rate is priced with a little more rebate to help reduce closing cost. If the Seattle home buyers want a lower rate with less rebate credit, they certainly can opt for that. Mortgage rates are not locked until we have a bona fide contract and the rates will be “floating” while they shop for a home.

The principal and interest on this rate and loan amount is $2,552.80 with mortgage insurance at $562.43 providing a PIMI payment of $3,115.23. Property taxes and home owners insurance are additional.

After the rebate credit, if the buyers negotiate the seller paying the remaining balance of their closing cost, prepaids and reserves in the amount of $4,000, the buyers will need around $70,000 for funds due at closing.

VA loans allow them to purchase up to $780,000 with a “VA Jumbo” loan.

The VA zero down loan limit in Seattle is $500,000. When a loan amount exceeds the limit, eligible Veterans can have a down payment based 25% off the difference between the sales price and loan amount.  

For example, a sales price of $780,000 less $500,000 loan limit = $280,000. $280,000 x 25% = $70,000 down payment.

The current rate I’m quoting for this VA Jumbo 30 year fixed loan is 3.250% (apr 3.379).

The principal and interest payment on this loan is $3,136.31. There is no mortgage insurance on a VA loan. Property taxes and home owners insurance are additional. 

If the seller pays for $4500 of the Veteran’s closing cost and prepaids, then the amount due at closing will be around $70,000.

USDA loans are not eligible in the Seattle area because it’s not a rural area.

If you are interested in buying a refinancing a home located anywhere in Washington state, I’m happy to help you. I’ve been originating residential mortgages at Mortgage Master Service Corporation since April 2000. 

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

APR is not the best tool for shopping mortgage rates

October 3, 2012 by 1 Comment

MortgagePorter-APRAPR was created by our government to help consumers select a mortgage rate. It was intended to be a tool that would allow someone to simply compare various mortgage scenarios and shop mortgage lenders for the “best rate” at the lowest cost. Unfortunately, APR is probably not providing an accurate view of what the true cost of the mortgage, whether it’s for a home purchase or refinance, is. [Read more…]

Filed Under: Interest Rates, Rant Tagged With: , , , ,

Should I refinance my car before buying a home?

September 19, 2012 by 2 Comments

Short answer: probably not.

Why? The refinance of the car will impact your credit score as if you have purchased a new car. Credit scoring favors established older debt over new debt. Once you have that new loan, even if the payment is lower and interest rate is lower, the established old debt is paid off and eventually loses the positive impact to your credit scores.

[Read more…]

Filed Under: Credit Scores and Reporting, Dear Rhonda, Residential Purchase Tagged With: , , , ,

How can a preapproval change?

September 14, 2012 by 2 Comments

MortgageWhen someone becomes “preapproved” for a mortgage, it boils down to they qualify for a certain mortgage payment based on their income and debts (DTI aka debt to income ratio).  A home buyer qualifies for the loan amount of the new mortgage and their funds available for down payment and closing cost determine the sales price.

[Read more…]

Filed Under: Residential Purchase Tagged With: , , ,

Tis the Season for Vacations

August 9, 2012 by Leave a Comment

Many families are squeezing in a vacation during the remaining days of summer. I can’t blame them, I’m just back from one myself! If you are in the mortgage process, it’s critical that your let your mortgage originator know of any vacation (or business travel) plans. 

If you’re going to be in a spot where you can receive important documents and respond to emails, it may not be a huge issue. If you’re going off the grid, it may impact your rate lock commitment if your loan is currently locked. Your mortgage originator will need to price out a long enough lock period for your loan (if you’re locking) or you may opt to float and not lock in the current rates available.  And of course, if you run out of time with your lock, the rate lock commitment may be extended. 

Another factor is signing your final loan documents. Escrow companies can email (I do not recommend sending final docs via email) or send your loan documents via something like FedEx or UPS. This can be a bit risky as well as if a signature is missed or something is not notarized properly, your transaction may be delayed.

The more notice you can provide your mortgage originator about vacation or business travel, the more time they will have to prepare your options for the mortgage process.

Filed Under: Mortgage Tagged With: , , , ,

More Listing Agents Performing “Sniff Test” on Mortgage Originators

May 21, 2012 by Leave a Comment

IStock_000019730096XSmallI’m noticing that more listing agents are performing, what I like to call, “sniff test” to check out the lender who has prepared the preapproval letter. By the way, I think this is an excellent idea. This is especially true if the listing agent is reviewing multiple offers, which is happening more in the greater Seattle area with non-distressed homes that are desirable and priced right.

The sniff test is typically a phone call by the listing agent so they can get an idea about the mortgage originator. The listing agent should not ask personal information about the potential home buyer (such as credit scores or available funds). 

When a listing agent contacts me, I know they’re sizing up:


  • how quickly I returned their phone call or email
  • how experienced I am at closing my clients specific mortgage program (for example, Fannie Mae Homepath, Freddie Mac Homesteps or FHA transactions)
  • how long I’ve been in the mortgage industry (over 12 years at Mortgage Master Service Corporation)
  • how quickly we can close by
  • to learn more about our company (family owned and operated since 1976)

I’ve heard from many local real estate agents that they need to make sure the loan can actually close. Often times, a preapproval letter may not be worth more than the paper it’s written on if the mortgage originator has not done their homework with the actual preapproval.  NOTE: you are NOT preapproved unless you have provided your mortgage originator your income and asset documentation. 

I wrote about “investigating your preapproval letter” many years ago at Rain City Guide. The issue with preapproval letters then was probably that anybody and their brother was a mortgage originator back in 2007. Now there are far less mortgage originators however, if the mortgage originator works at a bank or credit union, they may still lack experience (they’re not required to be licensed). A licensed mortgage originator may be new to the industry as well. Some large internet mortgage companies have been hiring LO’s who can pass the national exam but still lack experience. There’s a big difference between being a good a passing exams and successfully closing loans.

While the number of mortgage originators is dramatically down, it’s still important to make sure your mortgage originator has the capability to see your transaction to closing. It may be a consideration to make sure your mortgage originator can pass a sniff test.

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

Seattle Bidding Wars: What You Need to Know to Help “Win” Your Home

April 24, 2012 by 4 Comments

I’m noticing more “bidding wars” on new listings in the greater Seattle-Bellevue area. Because of the lack of non-distressed inventory and current low interest rates, multiple offers may occur driving the sales price higher than the original offered price. Sellers and listing agents may try to create an environment for a bidding war by slightly delaying the review of offers and by pricing the home either at or slighltly under what may considered “market value”.

Here are a few tips to remember should you find yourself in a possible “bidding war”.

Be prepared to provide a strong offer. Get preapproved early. This will help you know how much you qualify for and the seller will most likely require a strong preapproval letter that illustrates you are strongly qualified and that your loan will successfully close.

Determine your financial boundaries.  What is the most you want to pay for the home and for your monthly mortgage payment?  Bidding wars can be charged with emotion – keep your financial goals in mind. 

I often will provide several preapproval letters at staggered amounts for clients when they’re getting ready to make an offer. The letters might start at their preferred offer price and go up to the limit of their financial comfort zone is (of course they have to for that amount).

Work with a reputable lender. It is not unusual for listing agents to contact the mortgage originator to confirm the preapproval letter and to do a “sniff test” of your mortgage originator. If the listing agent is comparing two offers that are essentially the same, the mortgage originator may be a deciding factor.

Consider a shorter time period for closing. Depending on the seller’s situation, for example if the home is vacant, a shorter closing might help you win the bid. Contact your mortgage originator to see what time frame they can realistically close a transaction before writing an offer for a quick close.

Don’t forget the appraisal. Regardless of what you and five other bidders are willing to pay for a home, it still needs to appraise based on what other homes like have recently sold and closed for.  The seller does not have to accept a lower appraised value. Your lender will rely on the lower of the appraised value or sales price for your mortgage scenario.

Making a non-contingent offer.  Sometimes a real estate agent may suggest that you need to make an offer “non-contingent”. Consider how much earnest money you’re willing to lose if something happens where you elect not to proceed with your transaction (for example, if your appraisal comes in lower than the sales price and you’ve waived your financing contingency). NOTE: making an offer non-contingent on financing may be less risky depending on your personal scenario. 

Be prepared to do your home inspection prior to making an offer. It’s not unusal for greater Seattle area homes that are preparing a bidding war to request inspections be done prior to your offer. This will also help you make your offer “less contingent” it’s not subject to an inspection.

Being as prepared as possible may help give you an advantage over other offers. The sellers and listing agent wants to be assured that what ever transaction they select in a multiple offer situation has the best odds of successfully closing. 

I am happy to assist you with your preapproval and financing of your next home located anywhere in Washington state. I have been originating mortgages, including conventional, FHA and VA at family owned and operated Mortgage Master Service Corporation since April 2000. We are a well respected correspondent lender established in 1976 by the Porter family.  

Filed Under: Featured, Residential Purchase Tagged With: , , ,

Reader Question: Does Getting a Mortgage Preapproval Impact my Credit Score?

April 18, 2012 by Leave a Comment

One of my Seattle subscribers wrote me to ask this great question:  

“I’m considering purchasing a home soon, but I’m concerned about getting preapproved too early.  If I get preapproved and don’t find a home until the preapproval expires and I need a new one, will the credit hit from the first approval damage the score of my second approval?”

Credit scoring is intended to reflect a persons credit habits. When a credit report is pulled by a mortgage originator, a persons score may go down a few points. The initial pull of your credit report will help determine if there’s anything that needs to be address to help improve your scenario before you find your next home. It’s not uncommon to find that your score may be lower than what you estimated, perhaps there’s a parking ticket, or or a payment was reported late that you’re not aware of. This is the time to find out.

Loan preapprovals generally last around 90 days (this may vary depending on how old your supporting documentation is that was provided to validate your preapproval). Your credit report may not need to be repulled until you have a bona fide offer if at all depending on when your transaction is scheduled for closing.  Sometimes a “second preapproval” can be updated with new paystubs or bank statements.

Credit scoring is accumulative. So if you’ve been shopping for a car or a big screen television, these inquiries compounded with one from your mortgage lender will have more of an impact than just the credit being pulled for a preapproval alone.  By the way, if you’re shopping for new credit before (or during) being preapproved for a new home, be ready to explain every one of your credit inquiries. 

Odds are, if you’re worried about your score dipping from being preapproved you really should proceed with having it pulled by a local, licensed mortgage originator now…just in case a little elbow grease can help pump up your scores. Something as simple as paying down a debt to be under 50 or 30 percent of the total credit line may make a difference for an improved mortgage rate or qualifying for certain mortgage program.

I tend to lean towards getting preapproved as soon as possible. At the very least, it’s an opportunity to develop a game plan to make sure you’re in the best position possible for qualifying for your next mortgage. In addition, I’m seeing more non-distressed home homes in the greater Seattle area that are having multiple offers or “bidding wars”. If you’re considering buying a home, you’re going to need to be prepared with a preapproval letter from a reputable lender. You never know when a home that you want to make an offer on may become available.

If you’re considering buying a home in Seattle, Redmond, Walla Walla or anywhere in Washington, I’m happy to help you with your mortgage preapproval. 

Filed Under: Residential Purchase Tagged With: , ,
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