Category Archives: Industry Talk

2012 Conforming and FHA Loan Limits for King County

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The 2012 Conforming and FHA loan limits for King, Pierce and Snohomish Counties have been announced… ready for a little twist?  Conforming loan limits will remain the same as they currently are and FHA loan limits will be restored to the higher “temporary” loan limits that were available prior to October 1, 2011.

For a single unit residential property in King, Snohomish and Pierce County, the 2012 loan limits are:

  • $506,000 Conforming
  • $567,500 FHA – NOTE: FHA loan limits are effective as of November 18, 2011.

Yep… for the first time (I’m guessing ever) FHA loan limits are higher than conforming!  I’m reading in the blogo-sphere that the higher FHA loan limits are available – HOWEVER, I am not seeing this from HUD (on their loan limit site or a Mortgagee Letter) or from any of the lenders I work with.  Until I see something from HUD or a wholesale lender saying they’re accepting the higher FHA loan limits, then my assumption is that $506,000 is the loan limit through the end of this year.  If I learn otherwise, I’ll let you know!

UPDATE December 5, 2011:  HUD published a mortgage letter Friday and updated their website this morning (or in the wee hours last night) with the higher loan limits.

Financing Your Seattle Starter Home

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Ardell is beginning a series about styles of starter homes in Seattle. I thought I’d offer a companion post on a few different financing options for that home based on the list price she’s suggesting of $350,000.

Rates quoted in the post are effective as of November 1, 2011 at 2:00 pm.  I’m using 1.25% of the sales price/12 for the property monthly taxes and estimating home owners insurance at $50 a month – a total guestimate on my part.  I’m using a low-mid credit score between 720-739. Adjustable rate mortgages are also available – however in the interest of getting this post up in a timely manner, I’m sticking with 30 year fixed rates with minimum down payment scenarios.

A majority of first time home buyers may lean towards FHA for financing if they’re shy a significant down payment.  FHA currently allows a minimum down payment of 3.5% of the sales price, which can be gifted by a family member. Sellers can contribute up to 6%, however it must go towards closing costs and prepaids – it cannot be applied towards the down payment.  FHA has upfront and annual (paid monthly) mortgage insurance which is slightly reduced if the borrower puts at least 5% down instead of 3.5%.  Another plus about FHA insured loans is that they may be assumable to a future qualified buyer.

FHA 30 Year Fixed at 3.750% (apr 4.581) currently offers rebate pricing which reduces closing cost to approx. $256 with prepaids/reserves being additional.

  • Principal & Interest payment = $1579.81 plus mortgage insurance of $323.68 and est. taxes & insurance of $415 = total monthly mortgage payment of $2,318.49
  • 3.5% down payment = $12,250 minimum borrower contribution (can be gifted by family member)
  • Seller can pay closing cost plus prepaids/reserves estimated at $2940.  Total funds estimated for closing at $15,190.

In my opinion, more sellers should be willing to accept VA buyers – I’m saddened more don’t just on the basis these brave people served our country.  VA loans are not as challenging as they once were.  The Veteran cannot pay for the escrow fee, other than that, unless the seller wants to pay for closing cost (as they may with most any other type of transaction) the cost is minimal or no different for the seller.  VA just reduced the funding fee for these loans – making them more attractive to our Veterans.   Many qualified Veterans opt for to use this program as it offers zero down financing and no annual mortgage insurance and it’s a benefit they’ve earned.

VA 30 Year Fixed at 3.750% (apr 3.898) also has some rebate pricing (not as much as the FHA scenario) with closing cost (not including the buyer’s escrow fee) estimated at $1887 with prepaids/reserves being additional.

  • Principal and interest payment = $1643.60 plus taxes and insurance of $415 = total monthly mortgage payment of $2,058.60.
  • Zero minimum down payment required.
  • Total estimated closing costs and prepaids = $4592 which the seller can pay if negotiated in the purchase and sales agreement.  Total funds for closing estimated at $4592.

Conventional 5% down payment with private mortgage insurance.  Private mortgage insurance has been gaining in popularity for those who can qualify for it. This is mainly due to HUD’s latest increase to FHA’s mortgage insurance premiums.  With a 5% down payment, the seller can pay up to 3% of the closing closing cost.  There are different options with how private mortgage insurance with how it can be paid.

All of the conventional scenarios are with a 5% down payment of $17,500.

30 Year Fixed with Monthly Private Mortgage Insurance: 4.125% (apr 4.777).  Closing cost with the current rebate is approx. $2,930.

  • Principal and interest payment = $1641.46 plus mortgage insurance of $249.38 plus taxes and insurance of $415.00 = total monthly mortgage payment of $2275.84
  • Total estimated closing cost, reserves and prepaids = $5853 which could be paid for by the seller.  Total funds for closing estimated at $23,353.

30 Year Fixed with Single Premium Mortgage Insurance: 4.125% (apr 4.391).  Single premium mortgage insurance is just that – mortgage insurance that is paid for in one lump sum at closing. With 5% down, I think it’s rather expensive however, if the buyer was able to negotiate the seller paying for closing cost, it would really be worth having it go towards this.  Closing cost with rebate plus the single premium mortgage insurance comes to $10,278.

  • Principal and interest payment of $1611.46 plus taxes and insurance of $415.00 = total monthly mortgage payment of $2026.46.  NO monthly mortgage insurance.
  • Total estimated closing cost, reserves and prepaids are estimated at $13,201.  The most the seller can contribute is 3% with a 95% loan to value, which is $10,500.  Buyer would need at least $20,201 including down payment assuming the seller contributes the maximum 3%.

Split-premium mortgage insurance is a combo of monthly and single premium and I think a more likely scenario at 5% down than a single premium scenario.

30 Year Fixed 4.125% split-premium mortgage insurance (apr 4.586%).  Closing cost with current rebate pricing and reduced upfront mortgage insurance premium is estimated at $6709.

  • Principal and interest payment of $1611.46 plus mortgage insurance of $130.23 and taxes and insurance of $415.00 = total estimated mortgage payment of $2,156.69.
  • Total estimated closing cost, prepaids and reserves are estimated at $9,178 which the seller could hypothetically pay for since it’s under the 3% cap.  Total funds for closing are $26,678.

Now if this home was a Fannie Mae Homepath property (meaning the seller is Fannie Mae) it would qualify for the Fannie Mae Homepath mortgage which does not have private mortgage insurance (for credit scores over 660) and there is no appraisal required.  Fannie Mae Homepath will go as low as 3% down payment for owner occupied and 10% down for investment properties – however we’re just talking about buying your first home (primary residence) in this post. 🙂  You do receive preferred pricing at 5% down over 3% so if you can come up with that extra 2%, I highly recommend it! With Fannie Mae Homepath, the seller can contribute up to 6% of the closing cost if negotiated in the purchase and sales agreement.  Fannie Mae often has buyer incentive promotions where they chip in for a majority of the closing cost.

30 Year Fixed Fannie Mae Homepath Mortgage with 5% down payment:  4.875% (apr 4.947%) with closing cost based on factoring current rebate pricing at $2124.

  • Principal and interest payment of $1,759.62 plus taxes and insurance of $415 for a total monthly mortgage payment of $2,174.62.
  • Total estimated closing costs, prepaids and reserves are estimated at $5,148 which the seller could pay for. Total funds due at closing estimated at $22,648.

USDA loans also offer 100% financing but are not available in Seattle.  If this home was located in more rural areas, such as parts of Redmond or Duvall, it would possibly qualify this type of financing.  Since we’re talking about buying your first home in Seattle, I’ll leave USDA for a future post. 🙂

PS: I know I refer to the seller being able to contribute towards the closing cost on this post several times.  Real estate agents and or builders may contribute as well however, the total contribution amount (seller + agent + builder) cannot exceed the percentages that I’ve referenced.

Washington Association of Mortgage Professionals Celebrates 25 Years

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WAMPNext Thursday evening, the Washington Association of Mortgage Professionals has organized a “gala event” to celebrate it’s 25th anniversary and recognize “the best of the best” in the real estate industry from mortgage originators and companies to title, escrow and real estate agents.

michael-colagrossiI thought I would take a few moments to interview Michael Colagrossi, CEO of First Rate Financial (NMLS #60862 MLO#60242) who has been a member of WAMP for the last seven years and is currently serves as the Vice President and in charge of the Mortgage Broker Council, among other duties.

I have had the opportunity to get to know Michael via WAMP and various social media avenues.  My questions to Michael are in bold with his answers following in italic.

Michael, how has WAMP benefited you and your company? WAMP has allowed our company to become more involved with the ongoing changes in the mortgage industry and how to be proactive verses taking a reactive stance.  I also think as a professional it is important to take time to contribute to ones professional association for building and being involved  in a community of professionals allows one to share best practices, knowledge and experiences which benefit everyone.

In your opinion, what are the most 3-5 important contributions WAMP has made to the industry? First and foremost, I believe being in an association that has stood the test of time for 25 years being here are a resource to our industry as well as local and national outlets is a contribution in itself.   We interact with local government whether it be meeting with Maria Cantwell’s office to become their source of information for mortgage related questions, or meeting monthly with DFI in Olympia to give feedback on legislation and how we believe it impacts the citizens of Washington and those in our industry.

Secondly our ability to promote our professional among the public is important and what our members have to go through on a yearly basis to maintain their professional status. This can be seen by visiting our newly launched website at www.mywamp.org.

Third, we are an outlet for not only Mortgage Loan Originators but also all industry professionals ranging from appraisers, insurance agents, title and escrow professionals to voice their opinion in a social setting at our events.  I think sometimes just getting together helps make us realize everyone has a support system and there are others out there fighting the good fight.

WAMP has made it 25 years – what does the future bring for WAMP? Our organization has gone through ups and downs and we recently reorganized WAMP to better reflect the economy. Flexibility and more important, the people we have that volunteer on our board is what helps keep us going. For this is a volunteer organization and without everyone contributing, we would not be here today. We are currently growing and look forward to continuing our progress into the decades to come!

Can you tell us a little about the event next Thursday that is celebrating WAMP’s 25th anniversary? The event is meant not only to celebrate our organization turning 25, but more importantly to recognize the professionals in our industry who go above and beyond for their clients and fellow business partners. The awards re meant to let the community know more about these individuals and teams and acknowledge their contributions over the last year. This event is also a time for everyone to take a load off and celebrate a great year for with all the ups and downs, sometimes we forget to take a step back and smile and realize that life is not all bad and there is light at the end of the rainbow.

Thanks, Mike! 🙂

If you would like to attend this “black tie optional” event, RSVPs technically close tomorrow with limited rsvps next week.   Martin Kooistra, CEO of Habitat of Humanity’s Seattle/South King County is the Key Note Speaker with the awards dinner following.

I hope to see you at the Renaissance Hotel in Seattle on Thursday, October 27th.  RSVP here.

Warning: School Rankings Just Went Whacko!

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schoolMany parents or “to be” parents use School Rankings as part of their Home Search Process, and I generally support that wholeheartedly. BUT something is amiss!

I don’t know what just happened. Possibly a new set of test scores just came out? The lineup of schools on most School Rating sites just shifted, and the results are staggeringly “off”. One is always forewarned about using these sites as indicators of a school’s net worth, or an indication that your child will get a better education. But usually they follow the sequence from high to low that blends with the overall frame work of areas and home prices and long term supports for what I call “the lineup” of “Best Schools”.

But for some reason, one of the long term lowest ranked schools just jumped up to highest. Usually the top 1 to 5 schools stay in “a pack” and move around. One year one is “the top school” and then it moves to 2nd place. 3rd can jump to first…and so on.

The 10th ranked school RARELY jumps from tenth to first overnight! I’ve never seen that happen before, and I am seeing it happen today. It could have happened in the last week or so. I don’t check them every day.

Be forewarned…something is amiss. I can’t put my finger on exactly what caused this recent change, and it is fairly overall across different schools and different ranking sites. Just be forewarned that if these sites were ever reliable and/or you have considered them to be so, and I generally have over the years, there is something rotten in Denmark at the moment.

I strongly suggest you not use them in your home search process until we can figure out what the heck just happened.

National Coming Out Day; We’ve come a long way in real estate and lending

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October 11th is National Coming Out Day.  As an educator in the real estate and mortgage lending sector, I enjoy hearing stories from students about what it was like to sell real estate and originate loans in the 1950s and 1960s, before the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974.  The young-youngsters in the room are a bit taken aback to hear real-life stories about neighborhood segregation, discrimination against Jews or African Americans, and denying credit to women.  Blockbusting, redlining, and racial discrimination as well as mortgage lending discrimination happened to people who are still around to tell those stories because it really wasn’t that long ago.

Redfin – Scouting Reports – Nerd Values – Craig Newmark

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So…you may be wondering what all the Hoo-Ha is about.

The posts and comments in the above links are embarrassing to the Real Estate Industry at best, and convey a HUGE misunderstanding between the “Agents and the Nerds”.

Remember Glenn’s “Memo from Nerd-Land to Realtors: Drop Dead” post? Well…let’s just say the Industry’s immediate response to Redfin’s Scouting Reports was that same message…in reverse…for now.

The issues are many and varied, as they always are.

How many transactions does an agent have under their belt was the primary focus of this Redfin attempt at “transparency”.

* * * * * * * * * * * * * *Why is TRUTH creating so much controversy? Simple. Who’s Truth???* * * * * * * * * * * * *

Redfin Scouting Report

LET’S LOOK AT ONE OF THE KEY POINTS OF THE DISPUTE

USING THE CHART and SCREEN SHOT BELOW.


RedfinScoutingReportSellers2

OK…Right off the bat…HOUSTON…WE HAVE A PROBLEM!!!

In this corner…we have Ms. Traditional Agent with 8 sellers and 7 buyers in a 12 month period.

In this corner…we have…drumroll please…Ms. Redfin Agent with 37 “deals” in a 12 month period…no destinction between listings sold or buyers helped and 212 “DEALS IN A LIFETIME!” with no “lifetime” stats for anyone else.

Since every ONE Redfin agent is FIVE licensed agents, per the Redfin site,

that 37 for “the Redfin Agent”
is really only 7.40 compared to Ms. Prudential’s 15,
isn’t it?
37 “deals” divided by 5 licensees = 7.40 each.

C’mon Matt…I love ya. But treated everyone “the same”? I know you truly believe that in your heart of hearts…but your model is just so different that it stacks the deck in your favor. I’m sure after reading this, you will understand what all the hoo-ha is about. That is my goal…to bring both sides a little closer together, so Scouting Reports may in fact BE a future reality.

It would be great! It could be great! But, you can’t expect mls sytems or other agents to “stack their deck” the same way that your model does, can you? I mean really.

If one Traditional Brokerage put ALL the company’s sales in the names of TEN of their 100 agents…wouldn’t you call them “Liar, Liar…pants on Fire?” …and yet, that is what you are doing. God Forbid a Traditional Company would do that…you’d tear them to shreds!

Below, See Why the Redfin Data is SO MISLEADING! in a comparison of this type.

Redfin Scouting Reports

There are tons of comments all over the internet freaking out about all this, and rightly so, and from both sides of the equation.

To my good friend Jeff Turner who said to me that Homebuyers Didn’t ASK For THIS, I offer this quote,

“Steve Jobs Knew What We Wanted Before We Knew We Wanted It.”

THAT is what Redfin, and as Glenn Kelman put it “Nerd-Land”, is all about. The Traditional Industry makes what THEY want consumers to want…and then spoon feeds it to them with a little bit of sugar to make the medicine go down.

It is near impossible for Traditional Agents to understand Redfin, or Glenn Kelman, or Matt Goyer, because we are in the same industry, kind of. That makes every act of theirs “suspect” in the minds of their traditional brokerage “competition”. Or…perhaps…the darts are thrown merely to hold them at bay.

BUT what OUR INDUSTRY needs to “get” in order to understand Redfin and the Future of Real Estate, is the understanding of “Nerd Values”. I stole that term from Craig Newmark.

If you can understand Craig Newmark…even just a little bit, and I urge you to try, you will understand Redfin and what Redfin is about.

A few relevant quotes from Craig Newmark as seen in this video:

“Doing WELL by doing GOOD.”

“The SEA of Goodwill”

“…good intentions are REQUIRED…”

“LikeMinded.Org”

Nerd’s WILL: – “Annoy Them Into That Mode That Has Value.”

People Call Redfin “an outsider” BUT…remember this…Craig Newmark when creating Craigslist was ALSO “an outsider”.

Redfin is to Real Estate as Craigslist is to Classified Advertising.

The Nerds will be heard, and will infiltrate every aspect of our lives, until they beat down the selfish intentions and replace those with good intentions. That is the FUTURE. That IS Social Media. That IS blogging. That IS The Internet.

“People are normally trustworthy and generous, and the Internet brings the good out far more than the bad.” Craig Newmark

The Future of Real Estate will lie in these principals. The Nerds will “annoy (us) into that mode that has value”. In the meantime…the industry as a whole…well most of it…will keep responding with THIS.

Today’s Homebuyers Like Hardwood Floors

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Whether it’s a new house or an old house, people like hardwood floors better than carpet, especially on the main floor.

Looking at the stats for North King County, a home without hardwood floors is about 2X as likely not to sell, especially at a price point of $400,000 or more for the home. About 24% to 26% of homes that “expire”, or homes still on market and not sold, do not have hardwood floors. Compare that to only 14% of SOLD homes without hardwood floors and you see that 86% of recent home buyers chose a home that had hardwood floors.

Wide plank, narrow plank, light oak, dark finish…lots of variances as to preference of TYPE of hardwood floor. But hands down, even if the new buyer refinishes the floors to a different color, they choose homes with hardwood floors that they can refinish over homes that would need hardwood floors installed.

While “What type of carpet to use to sell your home?” has not changed much…the better answer for the main living areas is hardwood…hands down.

The “new” preferred color of hardwood is less red than the once popular Brazilian Cherry, darker than the blonde tones of yesteryear, but not quite as dark as the short lived chocolate brown craze that lasted about a millisecond.

A warm chestnut brown is the color of the day.

It’s great for the floors…but a little dull for the kitchen or bathroom cabinetry. The new warm chestnut brown hardwoods are best used when the kitchen and main floor baths are a light colored ceramic tile or a laminate floor that blends the color.

Armstrong calls the color “gunstock”. It’s darker than light…lighter than dark…and solidly BROWN vs orange or red tones. Much easier to decorate a room without clashing with the tone of the hardwoods when using this color in many and varied rooms in the house. As a matching cabinet color choice though…I don’t think that trend will last. It’s just too darned dull to have as a kitchen cabinet color.

If after reading this you have any questions as to the color I am talking about…just visit any new model homes…it’s all the rage…and they are pretty much ALL using it in their model homes.

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(Stats in this post not compiled, verified or published by The Northwest Multiple Listing Service.)

It’s time for a ban on all third party short sale negotiators.

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Not a day goes by that I do not hear a story from a Realtor, loan originator or consumer about a questionable if downright bad experience with a third party short sale negotiator. We’ve reached a point in time where we ought to consider eliminating all third party short sale negotiators. At the end of this article I will provide suggestions for home sellers, home buyers, real estate brokers/Realtors, attorneys, and regulators in order to maximize good consequences and minimize bad consequences for all parties.

Yesterday I received a frantic call from a homebuyer we’ll call Maggie, who found me online via this blog post. Maggie fell in love with a short sale house but after her offer was accepted and moving toward the close of escrow, the third party short sale negotiator announced that since the lender would not pay his full fee (short sale negotiator was already being paid $3000), as the buyer, she would have to come up with an additional $7,000 at the close of escrow.  Maggie was in love with the house but didn’t have the extra 7K so the third party short sale negotiator suggested she get a loan and pay him after the close of escrow.

There are so many things wrong with the above scenario I don’t even know where to begin.  So let’s begin at the beginning. The growth of fee-based, third party short sale negotiators was fueled by a perfect storm:

1) Collapse of the real estate bubble and resulting growth of over-mortgaged homeowners.
2) Rapid growth in the need for real estate listing brokers who know how to negotiate a short sale.
3) Decimation of the subprime industry and resulting out-of-work loan originators and Realtors.
4) “Get rich quick

King County Assessments Wins National Award

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“The King County Department of Assessment this week won the National Distinguished Jurisdiction Award from the International Association of Assessment Officials (IAAO) for innovative use of technology to map and locate properties to be assessed for local tax rolls.”

WooHoo!!! I love the King County Assessor’s Office, as most people know, since my color-coded valuation system is strongly linked to Assessed Values in King County. In fact one of my favorite mantras is “Trust Your Tax Assessor”. A lot of people don’t understand what I mean by that, as mostly it has to do with footprint per floor and relationship of land to house percentages, vs using Assessed Value as “market value”. but that’s OK. I love and appreciate them!

Kudos! Well deserved Kudos!

FULL PRESS RELEASE BELOW

King County Assessments Wins National “Distinguished Jurisdiction

Should the Washer, Dryer and Refrigerator go with the house?

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french door frigThe Washer, Dryer and Refrigerator are generally NOT Real Estate items that go with a house. They are considered to be Personal Property. That is why sometimes you will see a spot where these things go…but no appliance there. That will pretty much NEVER happen with a stove or oven or dishwasher.

A house comes with a stove and oven…pretty much always. It either comes with a dishwasher or it doesn’t, but if it doesn’t have one, it’s not because the seller took it with him. It’s because he never had one. More typical in very old homes, of course, than newer ones.

Because they are personal property, even when the washer, dryer and refrigerator ARE included, they are not usually inspected by the home inspector, nor are they covered appliances in a normal home warranty basic package. Yes-Stove. No-Refrigerator. Yes-Dishwasher. No-clothes washer.

Now let’s look at the odds of your getting a washer, dryer and/or refrigerator in your home or condo purchase.

72% of the sellers of homes sold that were not bank owned or short sales, offered the refrigerator as included in the asking price.

47% of the sellers of homes sold that were not bank owned or short sales, offered the washer and dryer as included in the asking price.

90% of the sellers of condos sold that were not bank owned or short sales, offered the refrigerator as included in the asking price.

70% of the sellers of condos sold that were not bank owned or short sales, offered the washer and dryer as included in the asking price.

52% of the short sale sellers of homes offered the refrigerator as included in the asking price.

29% of the short sale sellers of homes offered the washer & dryer as included in the asking price.

Before I post the stats for Bank Owned Property Sales, note that a bank generally makes “no representations” or guarantees. So there may BE a refrigerator or washer and dryer in that bank sold home, but they are not warranting that it will still be there at closing. If it’s there; it’s there. If it’s not; it’s not. In other words, you can’t refuse to close because the refrigerator took a walk during escrow. Nor can you demand that the bank seller buy you a new washer, dryer or refrigerator if that happens. It’s treated like any other Personal Property left in the home by the previous owner before it foreclosed. It just may happen to be there.

That said, some REO property listing agents did note the following as included.

Only 4% of REO homes sold noted the washer, dryer AND refrigerator as included.

17% noted the Refrigerator as included.

6% noted the washer and dryer as included.

So you are more likely to get a refrigerator in that home purchase

than a washer and dryer

by all accounts.

By no means is it a “given” that the washer, dryer and refrigerator will be included. On the other hand if there is a stove, an oven, a dishwasher and a garbage disposal, it would be rare indeed if any of those appliances were not included and those are usually all covered in the home warranty basic plan.

Microwaves? Most always yes if they are built in like a range hood…and not if they are sitting on the kitchen counter like the toaster and the coffee pot.

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(Required Disclosure) Stats are not compiled, verified or published by The Northwest Multiple Listing Service.) Seems odd to have to disclose that, given I’ve never seen an mls do stats about appliances…but just to be safe, including the required disclosure.