The Mortgage Porter

Your mortgage payment may be going up

Last week we received a postcard from our friendly tax assessor informing us that our assessed value increased 14% over last year.   When I owned my first home, this news would probably excite me.   What it really means is that our mortgage payment is going to increase.

Your note rate determines the principle and interest portion of your mortgage.  However, property taxes and home owners insurance can and do change...count on it.   Your mortgage company received the same notice about your property taxes, too (this is one reason why you pay the "Tax Service Fee" when you obtain a mortgage).   

Our new assessment is effective for our 2008 real estate taxes.   Once this rolls into place in the beginning of the new year, our mortgage company will contact us and may offer the following options, after reviewing our escrow account:

1. Increasing our mortgage payment to cover the difference in the account.
2. Allow us to pay the difference in a lump sum.

We will most likely opt to have our payment increased.   

Please do be aware when you're buying a home, that even if you have a fixed rate mortgage, the taxes and insurance are not "fixed".   If you currently own a home in the Pacific Northwest where our values are still strong, be prepared to have your mortgage payment increase in 2008.   

And for those of you who are squeaking by making your mortgage payment, this is even more reason to put away your credit cards and to have your credit reviewed by a Mortgage Professional in the event you need to restructure your current financial position (do this at least 6 months before you need to refinance so you have a chance to make any corrections or improvements to your credit).   Don't wait.

It's so nice to meet you!

Fact is, most of my clients, I never meet face to face.   Odd isn't it?  I'm caring for   one of their largest financial transactions and it's all handled via email or phone calls.  I could be standing in line at the grocery store next to someone who I don't know (or recognize) yet I've seen all their financial information...credit scores, bank accounts, retirement portfolio, collections, etc.  if I facilitated their mortgage.

I think when people find me from the internet, they want to make sure that I am "for real" and not some cheesy photo on a web site.    When clients are referred to me from their friends and family, they trust that their friend or family member had a successful experience working with me and they seem to not have the need to see me.   Let's face it, we are all very busy people and coordinating two or three schedules to coincide can be a small miracle.

The other day, I met a very nice couple during their lunch hours.   It was a refreshing reminder to me of why I should meet with clients face to face.  Not just so they can see me, I enjoyed getting to know them better on a more personal level.    However, sometimes when we have days ticking away on a newly composed purchase and sale agreement and the luxury of time is nil, we may not have the option of trying to schedule a "sit-down" consultation.   Finding the time to complete a loan application, review your good faith estimate or a credit report while sitting across from each other may seem challenging. 

A few months ago, I added a new feature to my mortgage practice that allows me to show my clients what I'm viewing on my computer right on their computer(s).   If a couple are in different locations and cannot travel to the same spot at the same time, we can arrange a virtual meeting to review all of the important documentation and planning that is required in the mortgage process.   It's very convenient for todays busy schedules.   Imagine this, you're sitting at your computer at work, home or where ever and your spouse is on their computer:  both of you viewing what I have on my computer.  Together we could be reviewing good faith estimates, credit reports, various reports analyzing possible mortgage structures...you name it!   

The problem is, I'm not using this tool as much as I should be!  So I thought I should put it "out there" to let you know this is available and is a great resource that I want to share with you.   Ask me about it. 

Friday's Rates

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  Conforming rate quote below based on owner occupied, "full doc" with minimum credit scores of 680 with an 80% loan to value or lower and a loan amount of $400,000.   Rates quoted are priced based on a 45 day lock with 1 point and there are no prepayment penalties on any of the rates quoted below. 

30 Year Fixed: 6.375% (APR 6.527%).  Payment per $1000 = $6.24.

30 Year Fixed with 10 Year Interest Only:  6.500% (APR 6.653%).  Payment per $1000 = $5.42.

40 Year Fixed:  6.625% (APR 6.771%).  Payment per $1000 = $5.94.

7/1 ARM:  6.125%% (APR 6.281%).  Payment per $1000 = $6.08.

5/1 ARM:  5.875%  (APR 6.013%).  Payment per $1000 = $5.92.

5/1 ARM with 10 Year Interest Only:  6.00%  (APR 6.139%).  Payment per $1000 = $5.00.   

JUMBO (Non-Conforming) Rates.   Pricing is based on the same criteria above, with the exception that the loan amount is $417,001-$650,000 (20% down).   

30 Year Fixed: 6.625% (APR 6.770%).  Payment per $1000 = $6.40.

30 Year Fixed with interest only payments: 6.750% (APR 6.906%).  Payment per $1000 = $5.63.

40 Year Fixed:  6.750% (APR 6.910 %).  Payment per $1000 = $6.03.

7/1 ARM: 6.250% (APR 6.292%). Payment per $1000 = $6.16.

5/1 ARM:  6.125% (APR 6.265%).  Payment per $1000 = $6.08.

5/1 ARM with 10 Year interest only payments: 6.125% (APR 6.265%).  Payment per $1000 = $5.10.

Please do not select your Mortgage Professional by interest rates alone and do not shop rates by APR.    This is just a small sample available of rates and products.  Rates are as of 9:30 this morning and may change at any time.   For your personal rate quote or for loan amounts over $650,000, please contact me.

Pike Place Market Blog Tour USA

Excuse me, can we ask you a question.... (sent from my Treo)

Live at Zillow

Ping pong anyone? (sent from my treo)

The Big Day is HERE - Welcome Blog Tour USA!

Just a few quick notes before I dash out the door to meet up with ARDELL and Rudy and Joe from Sellius (aka Blog Tour USA).   I'm going to be away from my phone for most of the day since I'm participating in the tour.   You're welcome to leave a voicemail or email for me; or you can contact Dina or Marilyn if you need immediate assistance with a transaction or lock.

Here is my schedule for today with Blog Tour USA:

• 10:00 am Zillow
• 11:00 am Redfin
• Possible other Seattle sites
• 7:00 pm Dinner at Ardells

There are people coming Canada and all over.  This is going to be a great event!  More to follow! 

Fun at the Carnival of Real Estate

No...I didn't win a prize but this was my first time trying out my luck with the Real Estate Carnival hosted by ARDELL at Rain City Guide.   I've never played at the Carnival before and I'm not sure why that is.    Any recognition that Mortgage Porter has received thus far has been from readers on their own; nothing that I applied for or sought out.   I have to say, I'm very surprised and tickled pink like a swirl of cotton candy that I received an "honorable mention" for How an Overdue Library Book Declined a Mortgage.

Here are the real winners of Carnival of Real Estate #51:

1. Brian Brady "Selling Like a Catholic School Girl"
2. Peter Comitini "Co-ops Losing Clout with Luxury Buyers"
3. Jay Thompson "The Combination Real Estate Agent/Lender: One-Stop Shopping, or Half-Assed Service?"
4. Frank Llosa "Reject THROW-UP Listings.  Do it RIGHT, not RIGHT NOW!"
5. Brande Bradford "Top Ten Tidbits for Success"
6. Silicon Valley Blogger "Expected Rate of Decline of Home Prices Next Year"
7. Greg Swann "Divorcing  the real estate commissions is simply a matter of HUD-1 bookkeeping effected by the mortgage lender"
8. Richard Kruse "It's a Bloodbath and Time to Swim with the Sharks"

Hats off to ARDELL who not only hosted this festival but did so while preparing for Blog Tour USA to land in Seattle with dinner at her home on Thursday.   A woman after my own heart!

And I can't think a better way for Mortgage Porter to celebrate it's 200th Post!

Refinancing with FHA...now that's Paris Hilton HOT!

What?  You've never thought of FHA mortgages as "hot"?  Read about this scenario of a client I recently helped and you just might be cooing "that's hot", too!

A family contacted me to help them refinance out of their subprime short term ARM and to consolidate some revolving debt they had built up.   Their 2/28 ARM was getting ready to adjust and their prepayment penalty was over.   This was the time to proceed with restructuring their mortgage and monthly debt.

The high balances that were being carried on the credit cards had weighed down their credit producing mid-scores of 648 and 582.   FHA is not credit score sensitive.   FHA does heavily consider the past 12 months of the credit history...late payments will negatively impact the chances for loan approval.  These clients just had too much credit debt and a nasty mortgage they needed to pay off...perfect candidates!

Here's what's so HOT about FHA refinances:

• Up to a 95% loan-to-value cash out with one mortgage (vs. a 1st/2nd combo).
• Even though there's upfront mortgage insurance (unless it's a condo), the monthly mortgage insurance is reduced compared to other 95% LTVs with mortgage insurance.
• Very competitive rates.
• Underwriting is focused on credit history vs. credit scores.
• Alternative sources of credit is allowed.
• Chapter 13 buyouts are allowed as long as payments have been made on time for the past 12 months and it is approved by the bankruptcy trustee approving the refinance.
• Fixed  and ARMs products available.
• No income limits or geographic restrictions.   (There are loan limits with FHA loans).

In this current market, without the FHA mortgage, my clients would have been forced to

1. Refinance into another crappy subprime loan due to their credit scores and DTIs (this is just buying time).
2. Keep their current mortgage and try to make the payments after the ARM adjust (almost certain failure).
3. Sell their house and move their family.

With this refinance, the family will be increasing their monthly cash flow by over $400 per month (before tax benefits) and swapping revolving debt for tax preferred mortgage interest.   They will also have a cash afterwords to complete a bathroom remodel and fund an "emergency savings" account.

FHA refi?   Yah, that's hot! 

The West Seattle Parade and the Alki Hot Rod Show

Do Saturdays get better than this? Somehow we managed to escape the rain just long enought ot enjoy the West Seattle Hi-Yu Summer Parade and the Alki Hot Rod Show.   Considering it's been raining for over a week and that it was dry for these two events, I'd say we lucked out!      

Young and old lined up California Avenue to watch the Seattle PD Motorcycles maneuver along with your classic beauty queens and parade floats.  The community of West Seattle has a lot of participation in this annual summertime event.   The drill teams were amazing, too.  There had to be some tired feet at the end of the day with all the stomping and dancing!

What was my big motivation to get out of bed and hustle to grab a spot on the pavement?  Why none other than JP Patches, my childhood hero, of course! 

And this would not be a Seafair event without the infamous Seafair Pirates!   You can hear them coming from blocks away with the boom and smoke of

their cannons.   Good thing they're followed by the Seafair Clowns so they can wipe the fear from the younger crowd with some giggles.

For more pictures of the West Seattle Hi-Yu Parade, click here.

The Alki Hot Rod Show was in a great setting along Puget Sound.   I absolutely love cars...especially vintage and historic.    To see more fabulous cars, click here.

Are You Preapproved for an Interest Only Mortgage?

You better double check with your Mortgage Professional.  As of Sunday, July 22, 2007 underwriting guidelines are tightening up for interest only conventional (loan amounts $417,000 and lower) mortgages. 

• Fixed Rate Mortgages (ex. 30 year fixed with 10 year interest only payments) will be based on the full PITI payment using the Note Rate.  (If there is a temporary buy down, the qualifying is still based on the Note Rate).
• Interest Only ARMs:  Qualifying is based on the full principal and interest payment (PITI) at the fully indexed rate (index + margin).   
• Negative Am. (deferred interest) ARMs:  Qualifying will be based on the full PITI at the fully indexed rate amortized over the full repayment term using the loan amount based on the amortization cap.   (I am not a fan of Option ARMs and I have never provided one to any of my clients.  For some people, they have probably been very successful tools…most of my clients, once they understood how the mortgage works, would opt for an interest only ARM instead of this mortgage).

So what does this mean?   

Previous Guidelines:  If a buyer was preapproved using a 5/1 Interest Only LIBOR ARM based on an interest rate of 6.125% earlier this week qualified for a payment in the amount of $2041 (plus taxes and insurance), they could borrow $400,000.

New Guidelines:  The current index for LIBOR is 5.4 plus the margin of 2.375% for this particle loan program = a fully indexed rate of 7.775% for the same ARM mentioned above.   Qualifying the borrower for a $2041 payment based on a 30 year amortization at 7.775% means the borrower now qualifies for a loan amount of $284,200.

This will obviously have a dramatic impact on purchases and refinancing out of interest only products.   This is still very new and we'll see if non-conforming products follow suit.

Here's what you need to do:

1. Agents:  Contact your Mortgage Professional today to see if you have clients who are preapproved for conventional financing with any interest only payments.   Confirm your buyer is still qualified.  (Your LO may need to check Fannie Mae guidelines).
2. Buyers/Borrowers:  If you're using interest only products with loan amounts of $417,000 or less, contact your Mortgage Professional to verify you are still approved.
3. Buyers:  Now more than ever, it's crucial that you meet with a Mortgage Professional prior to buying a home to become preapproved.   With mortgage programs and underwriting "tightening", there will be less options compared to just a few months ago.
4. Buyers/Borrowers:  Having solid credit is also more important.   You should review your credit a couple times a year.  If your scores are below 680, work on improving your credit.   
5. Borrowers who currently have ARMs:  Do not wait until just before your ARM is about to adjust if you are considering retaining your home.   Contact your Mortgage Professional six months in advance to review your credit in case you need to make adjustments and/or repairs.

This is not the time to be hiding or not dealing with your mortgage...guidelines are changing quickly and you need to be proactive and responsible with your largest investment.   If you need help, find a qualified Mortgage Professional such as a Certified Mortgage Planning Specialist, who has been acquired additional training and education or get a referral from someone you trust and respect.