The Mortgage Porter

Sunday Drive to Sonoma County...Part 2

This is the final part of our trip to Sonoma County (part 1 is posted here).  We had such a wonderful time, I thought I'd share some of our favorite parts of the trip with you as part of my Sunday Drive excursions on Mortgage Porter. 

Westside Drive in Healdsburg will take you along a beautiful windy road packed with wineries along the Russian River all the way to the Pacific.  We stopped at Twomey Cellars which has a great view and Matrix.   Hop Kiln Winery (pictured right) is another "must see".  It was too early in the morning for us to taste wines, we enjoyed walking around their grounds.   Located right next door is Rochioli Vineyards--this was also a recommendation from Dave Savage (DSR).  Sadly we were too early to sample these wines which are described as "legendary".

We drove along Westside Drive to where the Russian River meets the coast.  It's really beautiful and nice to dig your toes into some California sand.   We headed south along the misty Highway 1 until we reached Bodega Bay.   We had lunch at the Sandpiper in Bodega--do have the oysters baked in the chipolte sauce (I've been trying to recreate the recipe ever since). 

Bodega Bay is famous for Potters School, where Alfred Hitchcock's "The Birds" was filmed.  The Birds was probably the first "scary movie" I ever saw and is still one of my favorites to this day.  Apparently many others agree as Potters School had many curious visitors.   Note: no crows were harmed in this photo--this is a rental: 3 minutes for two bucks!

We caught Highway 12 to Highway 116 towards Forestville where we stopped at Iron Horse Vineyards.  Another great recommendation from Dave which has wonderful views over the valley of endless vineyards.  Our last winery on our vacation was Hartford Family Wines.  We really enjoy their Pinot Noir back at home and purchased two bottles while we were there.  And I was finally able to meet Dave Savage of Mortgage Coach, who not only provided us with great recommendations for our trip to Sonoma County, he also did a pod-cast interview with me a few months earlier.

You can check out photos from our trip here.

IMPORTANT TIP:  Do not try to carry on your wines from Sonoma County Airport (or anywhere for that matter).   The grumpy TSA person confisgated our two bottles of Hartford and would not allow us to check it or leave it for a friend (when he allowed the person right in front of us to check an item that was too large to be a carry on).  I was told that the wine was donated, the airport will not provide a receipt.  Lesson learned.

Better late than never!

I'm just now starting to see signs of some ripe tomatoes from my garden pots.

I'm sure they'll be worth the wait.   We've had such a lackluster summer that these fellas will be lucky to ripen on the vine.

Friday's Rates

I just posted rates over at Rain City Guide for today.  I know I normally post them here too...but since I did on Monday, I thought I'd give myself a break.   Last night, I did a tango with my old (pretty much) blind Pug, Orson.  He was under my feet as usual, while I was preparing dinner in the kitchen.   I guess we're not good dance partners because he sent me twirling into the base of our bay window which happens to be marble (darn I wish those corners were rounded).   My face broke my fall and I now have stictches around my nose and down towards my mouth...I've teased my kids telling them not to worry, I'll look like the Joker!  All kidding aside, it could have been much worse and I'm actually pretty lucky.

FHA Mortgage Insurance Increasing October 1, 2008

This is another result of HR 3221, I mentioned in an earlier post that the ceiling was raised for how much could be charged for FHA upfront and monthly mortgage insurance...I recently learned the actual details.

Upfront mortgage insurance will increase from 1.5% to 1.75% for purchases and refinances (not FHA streamlined).  Streamlined refinances will be 1.5% and FHA Secure will be 3.0% (hopefully you refinance before you need FHA Secure).

Monthly mortgage insurance will be 0.55% for loans with less than 10% down (or over 90% loan to value) and 0.50% for loan to values equal or greater than 90%.

Currently we have risked based pricing in effect through the end of September 2008 which rewards down payments and better credit scores.

Based on a 90% loan to value and 680 mid score purchase with a loan amount of $400,000, here's how now and October 1, 2008 compare (using rates I posted Monday for example sake only--this is NOT a rate quote):

FHA case numbers issued NOW through September 30, 2008:

Upfront MI = 1.25%. 400,000 x 1.25% = $5,000.  Adjusted loan amount (FHA upfront mortgage insurance may be financed) = $405,000 @ 6.5% for 30 years = principal and interest payment of $2559.88.

Montly mortgage insurance (referred to as annual MIP) is 0.50% = 400,000 x 0.50% = 2000.  2000 divided by 12 months = $166.67.

Total payment not including taxes and insurance = $2726.55

FHA case numbers issued October 1, 2008 and later (at least until the moritoriam is over on September 30, 2009):

Upfront MI = 1.75%. 400,000 x 1.75% = $7,000.  Adjusted loan amount = $407,000 @ 6.5% for 30 years = $2572.52.

Monthly mortgage insurance based on this example is the same 0.5% = $166.67 (monthly mortgage insurance is calculated off the base loan amount and not the adjusted loan amount).

Total payment not including taxes and insurance = $2739.19

$12.64 a month may not be enough to have you jump off the fence to buy a home or refinance if the above scenario resembles you.  I know that I would rather have the lower financed upfront mortgage insurance ($2000 lower based on this example).

I prefer the risk based pricing model.  It makes the most sense to me.  Reward more down payment and higher credit and compensate HUD for taking on loans with higher risk (lower down payments and lower credit scores).

FHA's popularity continues to grow with convetional (Fannie/Freddie) guideines tightening and with the risk based pricing increasing.   Do make sure that your Mortgage Professioanal is qualified and approved to do FHA loans--not all originators are.

Monday Morning's Mortgage Interest Rates

I know I typically post rates on Fridays...however since I was on vacation last week in Lake Roosevelt with my family and was unable to provide you with an update, I thought I'd break my normal routine and post rates today.  I will post rates on Friday at Rain City Guide.

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000.  This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock (for your personal rate quote based on your lock period, credit score and with or without points, please contact me) and there are no prepayment penalties on any of the rates quoted below. 

30 Year Fixed @ 0 Pts: 6.625% (APR 6.566) ~ Priced w/1 Pt:  6.375% (APR 6.535.%).

30 Year Fixed with 10 Year Interest Only @ 0 Pts: 6.750%  (APR 6.686%) ~ Priced w/1 Pt:  6.500% (APR 6.648%).

15 Year Fixed @ 0 Pts: 6.000% (APR 6.101%) ~ Priced w/1 Pt: 5.750% (APR 6.006%).

5/1 ARM - LIBOR @ 0 Points: 6.250% (APR 7.203%).  Priced w/1 Point: 5.875% (APR 7.150%).

Conforming-Jumbo Rates. Pricing is based on the same criteria above (including zero points) except where the loan amount is $417,001 - $567,500 for properties in King, Snohomish or Pierce Counties.  (For other conforming-jumbo loan limits in Washington state, click here); specifically priced for a sales price of $650,000 and a $520,000 loan amount.

30 Year Fixed @ 0 Pt:  6.625% (APR 6.686%) ~ Priced w/1 Pt: 6.375% (APR 6.531%).

30 Year Fixed with 10 Year Interest Only @ 0 Pts:  7.250% (APR 7.308%) ~ Priced w/1 Pt: 6.875% (APR 7.021%).

5/1 ARM - LIBOR @ 0 Pt:  6.875% (APR 7.453%) ~ Priced at 1 Pt: 6.125% (APR 7.243%).

JUMBO (Non-Conforming) Rates. Pricing is based on the same criteria above (zero points), with the exception that the loan amount is $417,001-$650,000 (20% down).   The specific scenario used to price the rates below is a sales price of $850,000 with a loan amount of $680,000.

30 Year Fixed @ 0 Pt:  7.875% (APR 7.936%).

30 Year Fixed @ 1 Pt:  7.500% (APR 7.662%).

FHA.  Pricing based on credit score of 620 or better and loan amount of $362,790 for FHA in King, Snohomish and Pierce Counties with 1 discount/origination point.

30 Year Fixed @ 1 Pt:  6.500% (APR 7.287%). 

FHA-Jumbo. Pricing based on 1 discount/origination point and loan amounts from $362,791 - $567,500 for King, Snohomish and Pierce Counties.  For other loan limits in Washington State, click here. 

30 Year Fixed @ 1 Pt: 6.500% (APR 7.283%).

VA. Pricing based on credit scores of 620 or better based on loan amount of $417,000.   For VA loan amounts over $417,000, please contact me.

30 Year Fixed @ 1 Pt:  6.500% (APR 6.824%).

Prime Rate (what HELOCs are based on):  5.000%

This is just a small sample available of rates and products.  Rates are as of Monday, August 15, 2008 at 10:00 a.m. and may change at any time.  Available programs may change at anytime as well.   This is not a guarantee nor is it a commitment of interest rate. 

Mortgage rates continue to be very volatile.  Stay tuned with what's going on in the market by subscribing to Mortgage Porter (upper left corner) and Mortgage Porter Twitter for live rate updates (click Follow). 

The Ruby Room

I just received an invite from on of my clients to attend a fashion show at The Paramount.  This isn't just any fashion show--it's for The Ruby Room.   The Ruby Room is a local non-profit that helps provide teens in financial need with gowns, shoes and accessories for their high school prom.   

The event (which is The Ruby Room's only fundraiser) takes place September 6, 2008 from 7:00-11:00 pm.  For more information or to purchase tickets, click here and create memories for a young lady by helping her attend her high school dance.   

How Will the New Jumbo Limits Impact You?

If you're buying a home $520,000 or below over the next year, you won't really be impacted by the reduced FHA Jumbo and Conforming Jumbo limits.   However, if you're considering buying a home with minimum down, you're losing $45,000 of financing power on January 1, 2008 with a $522,100 loan limit.

I wrote an article at Rain City Guide in June about how much home $17,550 can buy you in King, Pierce and Snohomish County with the current loan limit of $567,500.  The answer: $585,000 utilizing a FHA Jumbo.   Once the new loan limit is in place for our region, the most you can buy with minimum down will be closer to $540,000.   Although the new minimum required investment at 3.5% (effective October 1, 2008) will increase the amount required to $18,900 (based on a $540,000 sales price).

Want to do conventional 20% down and stay away the "true jumbo" rates by utilizing the maximum conforming jumbo?  Currently, a sales price (or appraised value in the case of a refinance) of $709,000 will get you pretty close to the existing limit at $567,200.  As of January 1, 2009, that sales price (or appraised value) is reduced to $652,500 for a loan amount of $522,000.

Refinances may also be impacted depending on what the payoffs are on the existing balances and if it's classified as a "cash out" refinance (second mortgages not obtained from when you purchased your home is considered cash out) which have tougher guidelines than a "rate term" refinance.  Underwriting guidelines continue to tighten and will continue as well.

As always, I highly recommend that if you are considering buying or refinancing in the next year, to contact a local Mortgage Professional at your earliest convenience.   The loan limits may not even impact you, it's never to early to prepare considering our current climate. 

Extensions: When Your Time is Up on Your Lock

I'm taking a "blogging break".  This article is a "re-post" from Rain City Guide.  To read the original comments, please click here.

When you lock in a mortgage interest rate, it is for a specific period of time, such as 30, 45 or 60 days. Your mortgage professional should make sure it is for an adequate amount of time to close the transaction. If it’s a purchase, the lock may be for a few days after the transaction and if it’s for a refinance, 30-45 days should be plenty of time in a “normal” market for the lock period. Purchases, depending on the type of transaction can be closed from two weeks or more (or more is preferred, less can happen too).

If you run out of time on your lock, it needs to be extended or the rate is no longer available (if rates have increased). Extensions, like locks, vary in price based on how long the extension period is. Sometimes, if rates have improved or are the same, the lender may offer a “no cost” extension-that always makes me happy. When rates have worsened, you can count on a cost for your extension. Every lender has different costs. As a Correspondent Lender, we work with many lenders and they all have different costs and policies for extensions. Some will allow us to extend for a specific amount of days; for example if we only need 3, we can have a 3 day lock at a prorated cost. Others bracket the days and so if we need 3 days, and they bracket extensions 1-10 days, we’ve paid for 10 days.

Here’s a few examples of extensions offered by a few of the lenders I work with. The cost referenced are in fee as a percentage to the loan amount. If your mortgage is $400,000 and we are working with Lender A below, your extension rate would be 400,000 x 0.015% = $60.00 per day.

Lender A offers a daily extension at a rate of 0.015% per day. They allow me to re-extend if I did not extend long enough the first time (most lenders do not allow this…you go directly to worse case pricing).

With Lender A, the difference between a 30 day and 45 day (original) lock period today is 0.165%; extending for 15 additional days (if you locked 30 days and needed up to 45) is an additional 0.225%.

Lender B offers extensions in brackets:

1-5 days = 0.063%

6-10 days = 0.125%

11-15 days = 0.188%

16-20 days = 0.25% up to 26-30 days = 0.375%

With Lender B, the difference between a 30 day and 45 day lock today is around 0.298%. Extending for 15 days with a 30 day lock is 0.188% based on locking today.

Lender C offers various options:

If your extension is within 10 days of your lock expiring and short term pricing has improved, they offer a 15 day lock at no cost.

If current pricing is worse than the locked rate, then you have the option of fee based pricing based on the expiration date:

5 days = 0.125%

10 days = 0.25%

15 days = 0.375%

30 days = 0.500% (purchase)

30 days = 0.500% (refi)

Lender C also offers market based pricing based on extending the lock from that date (instead of the expiration date of the lock) factoring in the current market.

When you extend on Lender C’s site, a LO has a couple of options they can select from based on how much time is needed and what is the lowest cost.

The difference between a 30 day and 45 day lock (currently) is 0.096% vs. having to extend after 30 days for 0.375% unless the market (rates) have improved.

Here are some possible reasons why a lock may require an extension:

~ Loan Originator did a short lock (less than 30 days or less than what was indicated for closing on the purchase and sale agreement).
~ Mortgage company did not perform in a timely manner.
~ Borrower did not provide documentation in a timely manner or caused delay in transaction.
~ Seller caused a delay in the transaction. (Especially possible when dealing with banks or short sales).

My personal opinion is that who ever caused the extension to be paid should be the party responsible for paying it. Often times, the delay may be unintentional but it happens. It’s crucial for borrowers to understand that once a loan is locked, a clock is counting down the days left for closing the new loan. On the occasion that I need to extend a loan, I review the transaction to determine why we ran out of time.

When I lock in a loan, I would rather have a few extra days than go short on the lock period. The cost of the next longer lock period is often less than what an extension may cost. The key is to make sure the loan is locked for the correct time frame to start with. Your Mortgage Professional should provide you with a Lock Confirmation that will disclose when your lock will expire. It’s important to confirm that your lender has allowed enough time for the transaction with the lock and to address the “what ifs” in the event the transaction does not close in time. With an extension, you are simply buying time.

August 2011 Update:  Since the Fed has created the LO Comp rule last April, mortgage originators are forbidden to use their compensation in the transaction at all...one of the many unintended consequences of the recent rule-making. Other parties may be able to contribute to this additional closing cost. Contact your mortgage originator for more information.

FHA Mortgage Insurance Premiums to Increase October 1, 2008

Yep...another bi-product of HR 3221, The Housing and Economic Recovery Act of 2008.  We don't have the final figures yet...this should be coming out any time from HUD.  The ceiling for FHA's upfront mortgage insurance will increase after October 1, 2008 from 2.25% to 3% for 30 year fixed programs. 

Currently FHA's mortgage insurance is risk based (tiered based on credit score and loan to value).  This will be put on hold beginning October 1, 2008 through September 30, 2009.  During this time, FHA's mortgage insurance will be a flat fee.

I will update you as soon as information becomes available.  HUD should be issuing a Mortgagee Letter with the final rules in the next 30 days.

Other posts regarding HR 3221:

FHA Minimum Down Payment Payment Increasing January 1, 2009

Down Payment Assistance Programs Days Are Numbered

First Time Home Buyer Tax Credit

Conforming/FHA Jumbo Loan Limits to Decrease January 1, 2009

Don't Forget to Vote Tomorrow

Just a friendly reminder that tomorrow you can should vote in Washington State's Top 2 Primary.   

This election will determine which two candidates will advance to the November General Election. 

So vote...and vote often! 

For more information, click here.