2013 Mortgage Loan Limits for King County

rate changesThe 2013 mortgage loan limits for the  greater Seattle area are for the most part, the same as 2012.  The following loan limits apply for homes located in King, Snohomish or Pierce Counties.


1 Unit: $506,000

2 Unit: $647,750

3 Unit: $783,000

4 Unit: $973,100


1 Unit: $567,500

2 Unit: $726,500

3 Unit: $878,150

4 Unit: $1,091,351



NOTE: Technically speaking, VA loans do not have a “limit”. $500,000 is the highest loan amount for a “zero down” VA loan. If a qualified Veteran wishes to buy a home priced above $500,000, the down payment will be 25% of the difference between the sales price/appraised value (lowest of the two) and $500,000.  For example, a $600,000 sales price would have a down payment of $25,000 ($600,000 less $500,000 = $100,000 x 25% = $25,000).

You can find a complete list of loan limits by county for homes located in Washington state in the “footer” of my blog.

And the Fed…

With the Fed’s key rates all ready at a rock bottom 0-0.25%, no one anticipates rates to be lowered.  Any reaction will be from the release of their announcement which is anytime. 

Dan Green, one of my favorite mortgage bloggers, is documenting the impact of today’s Fed announcement to mortgage rates via Twitter.   Check it out.

I’ll update this post in a few moments with my two cents following the FOMC announcement.

Update 11:20 am.  

The Fed leaves the Funds Rate unchanged stating that “the economy has weakened furthe”r since their last meeting in  December.   They also reaffirmed their committment to continue buying mortgage backed securities:

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. The focus of the Committee’s policy is to support the functioning of financial markets and stimulate the economy through open market operations and other measures that are likely to keep the size of the Federal Reserve’s balance sheet at a high level. The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant.”

Click here for today’s FOMC Statement and be sure to follow Dan Green’s reporting on the reaction of mortgage backed securities.

FOMC Cuts Discount Rate by 0.75%

From the FOMC press release:

“The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent….

As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.  The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.

…In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent.”

Mortgage rates should continue to improve with the purchase of MBS.   This is why you need to do as Kenneth Harney recommends in this Sunday’s paper:

“Ask your broker or loan officer whether you can lock in today’s rate but still have the ability to move down should cheaper money become available to you.

Not all lenders can accommodate such requests. Some brokers offer 60-day locks with that option; others may charge you”.

What should a loan modification look like?

I just wrote this long comment on Jillayne’s post, and decided it needed to be a post of its own.  This loan mod returns the risk premium that was not effective at controlling risk.  It didn’t work…give it back. It also makes the lender partly responsible for approving short term income on a long term basis.  It does not involve ANY loss to the lender below the face amount of the notes, and gives them some interest, and saves the homestead.  I think it includes all aspects of consideration for a loan mod, but finding staff competent to come up with loan mods in a short period of time, is not realistic.

What we do know is that the higher risk premium rates, did not cover the risk.

Let’s take an example and see how it plays out, and propose a loan mod.

Family qualified for their current home based on $80,000 a year. $60,000 was salary and $20,000 was two years of consistent bonus or overtime. That was considered conservative lending guidelines “two years of proven history on bonus or overtime

I Love Brian Brady's Twitter – You Will Too

I wish I could save this post for Valentines Day!   Earlier this month, fresh from Inman NY, Brian announced that he is going to start posting tidbits of rate info on Twitter.   If you subscribe to Brian’s Twitter, Mortgage Report, you’ll be notified if he feels you should be locking or floating…this is similiar to what I receive by investing my subscription to Mortgage Market Guide (bond quotes).  However, this service is free and priceless!  

Here are the alerts I received from Brian just today (which was an exceptional day):

  • 5:10 a.m. Stock futures are down 5%.  Good for mtg bonds and rates – FLOAT long purchases, LOCK all others – update later
  • 5:48 a.m. Emergency Fed Cut
  • 7:05 a.m. Mortgage bonds up close to half a point.  Expect lenders to offer 30YFRM below 5.5% today (conforming limit)
  • 1:37 p.m. FYI: I locked a 30YFRM at 5.25% with 1 point for a 5.53% apr today.  Expect ARMS to drop this week
  • 6:11 p.m. FLOAT loans closing >15 days, LOCK loans closing <15 days.  Wild day today, tomorrow promises to be as nuts.   You will hear it here 1st

This is simply a brilliant idea and a huge commitment from Brian Brady of Mortgage Rates Report and Bloodhound Blog.   If you can’t wait until the end of the work week for “Friday’s Rates”, subscribe out Brian’s Twitter!  You’ll be twitterpated.  😉

5 Steps for Shopping Mortgage Interest Rates

[photopress:693_kick_tire.jpg,thumb,alignright]What?  I’m writing about something I don’t agree with in principle?  True.  I think that many people are spinning their perfectly good wheels in order to try to find a rate they cannot have unless they’re prepared to lock at the precise moment they are shopping.  But, the practice of rate shopping and kicking the tires of Loan Originators appears to be a necessary evil in the mortgage process. 

Here’s my advice, if you feel you must shop rates.

Step 1:  Contact at least three different people you trust financially and ask for referrals.   I suggest family members, friends, co-workers, your real estate agent, CPA, Financial Planner, etc.   Ask your sources what they liked and did not like about their Loan Originator.   Gather their contact information and visit their web sites and blogs, if they have one.  

Step 2:  Prepare your personal financial story.  You’ll need to retell the exact scenario to each Loan Originator so they can each provide you a rate based on the same information.   If you just want to see how skinny someone will quote a rate to you, you can make up a vanilla story of “I’m putting 20% down on a $500,000 house.  My mid credit score is 700 and I would like a 30 year fixed rate with no origination or discount points, please.  I would like the loan priced with a 30 day lock

Why Selecting a Lender by Rate Alone is Not in Your Best Interest

When Ardell suggested that I post rates on Friday, I was a bit reluctant to do so.   Why?   Because it promotes rate shopping and I don’t believe that is the best way for consumers to select the professional who will be advising them on one of the largest financial transactions they will make in their lifetime.   But I must admit, the posts have created a lot of very interesting comments and kudos to Ardell for putting me on the spot to post rates.

Recently, one of RCG’s frequent readers added a comment on Mortgage Rates for Friday Morning that brings home why you should not shop mortgage professionals by rates and that you should select your mortgage professional by referrals instead: 

I got a GFE from a broker recommended to me by my boss. She was smart and knowledgeable, but not particularly personable. 

I also got one from a guy who worked with my Realtor who called himself a Home Mortgage Consultant (with BIG BANK Mortgage). Personable, but not that sharp. 

I also called a few other brokers off the net and paper – straight APR shopping. 

The first broker, the one recommended, had the best rate. Because I liked my Realtor, I gave the (Bank) guy a shot to match her rate, which he did. 

He made numerous mistakes, and I was forced to go over my docs repeatedly with a fine tooth comb to make sure they were correct. 

In retrospect I should have gone with the recommended broker, though perhaps not, given that she was angry with me and showed it. 

In the end, however, I am going to go with the reputable person who gives me the lowest rate in an apples-to-apples comparison. A quarter point could mean 10s of thousands of dollars over the life of a loan. That’s going to trump loyalty every time, and you are fooling yourself if you think otherwise. 

There are many issues with shopping lenders by rate:

  1. You must shop all of the lenders at the same time on the same day.   There can be several price changes throughout a day.  You cannot compare apples to apples if 5 minutes after you receive one quote, you call the next lender and rates have changed up or down.  Brian Brady did an excellent post:  You’ll Never Get the Lowest Rate.
  2. Unless you’re prepared to lock in the rate the moment you’re dialing for dollars, the rate that is being quoted to you may very well not be the rate you receive when you decide to lock.    If it’s not a confirmed locked in rate, you don’t have it.   It’s a quote, not a guarantee.
  3. The lender who is “quoting

Puget Sound's Market Conditions Update

Every New Year, my husband’s family makes a trip to Ocean Shores with most of his brothers and sisters and nieces and nephews. It is a tradition that we look forward to which includes as much bowl games you can cram into a weekend, razor clamming, go karts and I get to read the newspaper from front to back while everyone else in our hotel room is still sleeping.

To my delight in the Dec. 30, 2006 issue of The Seattle Times, there is an article forecasting the local 2007 real estate market called Looking ahead: The sky isn’t falling for the Puget Sound market

Exotic Loan Programs and Potential Foreclosures

[photopress:Dollar_20Squeezed.jpg,thumb,alignright]Every “exotic” loan program has a potential appropriate user of that program. What we are seeing more and more today, is the industry using these perfectly good programs inappropriately, to “get the deal done”. Before I go into my take on the situation, let me point out two relevant sites worth reading. One is on “Non-traditional mortgage product risks and the other is HUD’s warning regarding Predatory Lending.

None of the programs being used today are new. What IS new, is the fact that they are being used by the wrong people for the wrong reasons, with the assistance of the real estate professional and the lendng reps. The Feds in their statement, acknowledge that these products have been around for a very long time, and have been used appropriately until recently. On the HUD site, the main point that ties into the “exotic loan” problem, is when lenders are “Making loans without ample consideration to the borrower’s ability to repay”.

Client A has $100,000 in a 30 year bond he purchased 28 years ago with an interest rate of 14%. He has $1,200,000 in various retirement investments. He has $50,000 in a savings account for emergencies. He is 57 years old and is buying a view condo for $750,000 that he plans to live in forever. He earns $200,000 a year and plans to work for at least 8 more years, possibly longer. He decides to buy the condo with zero down and an interest only loan.

That example may sound ludicrous, but 12 years ago they were the ONLY guys I saw using interest only loans. Their investments were earning well over the interest rate on the mortgage. They weren’t going to take money from an investment earning 12% to put down on a property where the mortgage was only costing 7%. Until recently, interest only loans were an investment decision, not a means to qualify for the home purchase.

Basically what the Feds are saying is that the exotic loans are, and have always been, very good programs used sparingly in the past by very savvy and knowledeable people. These lower payments were not meant to be used as a means to qualify for more house than you can afford. They were meant to be used by people who more than qualified at a higher payment, but chose the interest only option for reasons other than to qualify for the home purchase.

The key phrase in the Fed paper is “consideration of a borrower’s repayment capacity”. The key phrase in the HUD warning is “ample consideration to the borrower’s ability to repay”.

Zero down loans replaced VA and FHA for the most part. High rates on the second mortgages replaced PMI. Ten years ago a person might put 5% down and take out a 95% first mortgage and a lower rate, but they had to pay “Private Mortgage Inurance” on the top 15% of the LTV. The PMI amount was not tax deductible. The payment on the second at the higher rate was lower than the loan plus PMI payment and fully tax deductible. A conventional loan with a high rate second may “look” bad, but actually the numbers usually work better than a regular loan with PMI (the old fashioned way) or a 3% down FHA with an up front plus monthly MIP (Mortgage Insurance Premium).

Bottom line is that ALL of the “exotic” loan programs have valid and good uses. Let’s include “stated income”. Stated Income loans have long been used appropriately by people who more than qualified for the loan. Stated Income was often used by someone who had income they didn’t or couldn’t report on their tax return. There was no question but that they could afford the monthly payment, problem was they couldn’t PROVE it, or were not willing to prove it. Maybe it was some limo driver earning $23,000 a year and getting $1,000 in tips he wasn’t reporting. Maybe it was someone with a cash business that was showing $65,000 a year on his tax return and stuffing the rest in his mattress. Maybe it was a prostitute or a mob member…whatever. It was someone who could make the payment, it was just somebody who didn’t want to prove that they were able to make the payment, and so used a “stated income” loan. Stated Income loans are not supposed to be used as a means to “pretend” that you make more than you DO earn.

Zero down loans are NOT for investors! Yes I will yell that one from the tallest building. I heard that lenders “start to question” a guy who has SEVEN zero down loans in a short period of time. DUH! Why’d you let him get to seven, when he shouldn’t have had ONE! Zero down loans are only for people buying a home to LIVE in it.

So, bottom line. When you start seeing foreclosures, don’t assume the market is headed south. Understand that lenders are not following the Fed and HUD guidelines to give “ample consideration to the borrower’s ability to repay” before approving the loan. Maybe the guy who bought at $450,000 only qualified at $400,000 and was stretched beyond his limit. Maybe the guy who bought 6 homes zero down, stacked costs and stated income in 18 months time, got caught in the web he weaved when first he to practiced to deceive, the underlying lender with full knowledge of the real estate agent and the loan broker. Maybe all the guys who took the $6,000 seminar on how to buy lots of property with no money and no job, are all going down…but that doesn’t mean they are going to take the whole market down with them.

I went to a closing with someone else’s client as a “favor”. I got to the table and asked them if they knew that the payment including taxes and insurance was 60% of their gross income! The lender said, “the lender isn’t impounding taxes and insurance”. The buyer said, “We thought the payment was going to be $300 less than that AND included the taxes and insurance. They asked me if they could sell the house in six months if it was impossible to make the payment. I said not with the costs stacked into the price and the prepayment penalty stacked on top of that. I stood up from the table and said, no one is signing today. How many foreclosures will come about because no one stood up and said, “No one is signing today”.

If someone readily qualifies for the payment at say 33% of their gross income (not 60%!) and has a reasonable “back end” when you add their other debt payments to say 40% (not 73%) and isn’t using stated income, no impounds, interest only and subprime loans to get around the high back end, all is fine.

The “Exotic” programs have their place in the lending industry. We just have to stop agents and lenders from using these programs inappropiately as loopholes to “Get the Deal Done”. If the buyer doesn’t like any of the homes he can afford, send him home. Don’t send him to a lender who can figure out how he can qualify to buy a more expensive house, that he will like better, but can’t really afford.

Moving Forward…

I’ve been a little busy lately, so I haven’t had a lot of time to give an update on some of my favorite conversations around the web… Nonetheless, I’m back for an abrivated version (i.e. only 9 articles instead of the usual 10)…

Beau turned me on to a great article by Jay regarding the 30-year trend for Mortgage Rates… Interesting stuff. Also, don’t miss Jay’s tribute to Harry Ramos

I just got an email from someone at Windermere letting me know about Windermere’s new (beta) mapping platform… This is an update to the beta mapping platform they released a little over a year ago and I think they’ve made some great improvements… Here are some features I like: (1) Simple map-based search, (2) intuitive zoom feature, (3) Simple pop-up interface, (4) the filter tool is relatively straightforward, (5) viewing the details doesn’t require a page reload, (6) same with viewing the “list of homes”, (7) saving, emailing and/or contacting an agent can all be done without leaving the map view (8) simple city, state, zip box allows for easy navigation to distant locations… The only complaint I have is that the design doesn’t feel polished, but considering it is a beta and the technology works well, the design is minor…

Steve Weise also let me know about his map-based appraisal tool he recently released and asked me to solicit feedback from the RCG community… His interface is too GIS-specific for my tastes, but maybe other’s will find it interesting and/or useful.

Clever, but probably too simplistic, Rob let me know about his collection of quotes that compare the great depression to today’s housing market. Any way you look at it, he provides a good read…

Greg picked up the new Move commercials on YouTube… The latest fun news around Move is that my favorite commercial (Search) got picked up by AdForum and is currently displayed on their front page!

I really like how Zachary picked up the ball and started posting videos of his properties… They are not high art, but I think they are darn useful, especially for someone selling land in such a beautiful area!

Sometimes being a great agent means divulging the good with the bad… Osman tells us how people can and do loose money in real estate

I hate homework too!!!

The NYTimes real estate blog is officially dead. (although it is everywhere now, I first saw it on Luxury Sarasota Living). I can’t say I’m particularly sad, because the main editor seemed to have such a thing against real estate agents that his blogging on the subject just wasn’t very interesting… (Marlow also noticed this tendency of Damon).