Cobalt Mortgage, a Kirkland,WA-based mortgage bank and a preferred lender of Seattle Condos And Lofts, is now offering 3% down payment conventional loans for condo purchases.

In addition to the low down payment, another feature for borrowers is the ability to pay the mortgage insurance premium in one lump sum upfront. While it would add to a buyer’s closing costs, it would be less expensive over the long run and would reduce the monthly payment by up to a few hundred dollars (depending on loan amount). For a $200,000 loan with a well-qualified buyer, the upfront mortgage insurance fee would be approximately $5,400 with no monthly mortgage insurance payment.

The program also allows a seller’s contribution of up to 3% of the sales price towards the buyer’s closing costs, which may include the upfront mortgage insurance amount.

Unlike FHA, Cobalt’s 3% down program is available to all condo properties, provided the condominium meets Fannie Mae guidelines.

So what’s the catch? The tradeoffs for the lower down payment are added fees and a higher interest rate given the higher loan-to-value amount, but it’s still competitive. It’s best suited for well-qualified borrowers, those with high credit scores (740 and higher), who do not have available funds for a sizeable down payment.

Want to learn more? Contact us today and we’ll have our preferred partners at Cobalt Mortgage provide you with the details!

HUD finally announced yesterday that it would be raising the Upfront Mortgage Insurance Premium (MIP) for FHA loans effective April 9, 2012, from 1.00% to 1.75% of the loan amount. Fortunately, the upfront MIP can be financed and amortized over the life of the loan.

HUD had previously reduced the upfront MIP to 1.00% back in October 2010.

Additionally, HUD is mulling two other changes to its popular FHA program – increasing the annual MIP and reducing the seller contribution amount. Slated for June 1, 2012 (not yet confirmed) The annual MIP will increase 10 to 25 basis points depending on the size of the loan. The annual MIP will also increase effective April 9, 2012 between 10 and 25 basis points depending on the size of the loan. For most borrowers, with loans less than $625,500, they will likely see the annual MIP increase from 1.15% to 1.25%. For high balance loans, the annual MIP will increase 25 basis points, up to a total of 1.50% as of June 11, 2012. Though it’s called an annual MIP, it is reflected in a borrower’s monthly mortgage payment.

This would be the third increase to the annual MIP since October 2010.

The other proposal under consideration is reducing the seller’s contribution amount from the current 6% to the greater of 3% or $6,000. On a $250,000 loan, that’s still $7,500 in seller contributions, so it’s not likely to make much of an impact for most buyers.

Although, FHA has become popular for condo purchases over the past several years, particularly with more flexible qualification guidelines (provided the condo building is FHA approved), the continued increases in the upfront and annual mortgage insurance premiums are rendering FHA loans less desirable.

Comparatively, well-qualified buyers can obtain conventional condo loans with as little as 5% down and a lower payment amount. And, in some cases, without mortgage insurance (depending on lender and available loan programs).

Contact us if you’re considering a condo purchase and we’ll put you in touch with our trusted mortgage partners.

Now, buyers who hope to purchase a home with FHA’s low down payment loan program are getting frustrated that fewer condo buildings are now FHA approved.

For buyers like Kristy Fender, of Chicago, FHA certification is a must-have on her list, and not just because it lets Fender and her fiancé, Dan Harvey, make a smaller down payment on a home purchase. She also figures that in approving buildings the FHA is doing the due diligence that she would otherwise have to do.

That’s amplified by the fact that many associations haven’t taken the initiative to obtain FHA approval, do so poorly, or encounter problems related to distressed properties.

The number of rejected buildings is adding up, due to bad paperwork and bad balance sheets as an increasing number of condo associations struggle with rentals, short sales and foreclosures. It is jeopardizing the plans of condo sellers who rely on the FHA’s stamp of approval as a marketing tool and condo buyers who either want or need an FHA-approved building.

Condo financing has become more complex and challenging for buyers (and sellers) since FHA and Fannie Mae tightened their condo qualification guidelines. With conventional condo loans requiring at least 10% down, FHA has been a favorable option for condo buyers.

But…

Some associations are deciding that the effort and the expenses tied to the application process, which can run into the thousands of dollars, aren’t worth the payoff and are letting their certifications lapse.

It behooves associations and sellers to be proactive with their condo building’s FHA certification, which is more significant now as record low interest rates are encouraging first-time buyers into the market place, many of whom gravitate towards FHA approved condos. And, it doesn’t have to be a complicated process.

We can help.

We’ve team up with a respected, local mortgage company who will take the reigns of the certification process at no cost to the association, seller or buyer. Whether you’re a buyer considering purchasing, or an owner thinking about selling in a non-approved condo building, we can help. Contact us to learn more about this special program.

Last week, FHA got a reprieve from Congress, which reinstated the higher loan limits in 42 states through 2013. For the Seattle/King County area the loan limit is back to $567,500.

Unfortunately, Congress chose not to reinstate the higher limits for conventional loans (e.g. Fannie Mae and Freddie Mac). The conventional loan limit in Seattle/King Country will remain at $506,000.

Most single family and townhomes will qualify for FHA. The higher limit means an additional 92 properties are eligible. Of the 1,709 single family and townhome properties currently for sale in Seattle today, 70.6% are available under $567,500.

Condos are a different story as the building complex will need to be approved by FHA in order for purchases in those buildings to be eligible for FHA loans. Recent changes to FHA guidelines now require condos to undergo recertification every two years, so some buildings that were once FHA approve may no longer be.

As of today, per the HUD website, 408 condominiums buildings in Seattle are FHA approved, which has increased over the past year. Overall, less than half of the condo buildings in Seattle are FHA eligible.

Of the 873 condos currently available for sale in Seattle, 35% or 307 units, are FHA approved. Throughout King County, 42% of the condos units for sale are FHA approved.

>> View FHA approved Seattle condos listed for sale. *

* Subject to buyer verification

The following is from a HUD press release:

FRIDAY, JULY 22nd IS DEADLINE FOR AT-RISK WASHINGTON STATE HOMEOWNERS TO PRE-APPLY FOR UP TO $50,000, FORGIVABLE “BRIDGE LOAN” TO AVOID FORECLOSURE & HOLD ONTO HOMES

SEATTLE – This Friday, July 22nd, is the deadline for at-risk Washington state homeowners facing foreclosure as a result of a loss in income due to a change in employment or high medical bills to qualify for Emergency Homeowners’ Loan Program (EHLP) interest-free, forgivable “bridge loans” of up to $50,000 to bring their mortgages current and help them pay their mortgages.

The U.S. Department of Housing and Urban Development awarded Washington state some $56 million for “bridge loans” under the EHLP program. The average EHLP “bridge loan” is expected to be about $35,000 so as many as 1,500 eligible, at-risk homeowners at-risk could benefit from the program, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

“The clock is ticking for Washington state homeowners at risk of foreclosure,” said HUD Northwest Regional Administrator. “It is absolutely critical for them to get to the EHLP Web site at www.findEHLP.org before Friday, July 22nd, to pre-apply for an EHLP bridge loan. Simply put, it could be the difference between losing or holding onto their homes.”

At-risk homeowners interested in the EHLP “bridge loan” program should visit its Web site at www.EHLP.org or by calling EHLP at 855-FIND-EHLP (346-3345). By Friday, July 22nd, they must have completed and submitted the EHLP Pre-Applicant Screening Worksheet and the Third-Party Authorization to pre-apply.

EHLP funds will pay a portion of an approved applicant’s monthly mortgage including missed mortgage payments or past due charges including principal, interest, taxes and insurance. Only participating EHLP agencies found on www.FindEHLP.org are approved to accept Pre-Applicant Screening Worksheets. Homeowners should beware of scams. It is free to submit a worksheet or get assistance with completing the worksheet. Any company asking for money to assist homeowners with the EHLP application process is a scam. Contact information for participating agencies, the Pre-Applicant Screening Worksheet and more information on the EHLP assistance and its eligibility requirements can be found at www.FindEHLP.org or by calling toll free at 855-FIND-EHLP (346-3345).

To be eligible for an EHLP “bridge loan,” households may incomes of no more than 120 percent of area median income. For EHLP income limits in Washington state, see http://www.huduser.org/portal/EHLP/index.html

Due to expected high demand for EHLP “bridge loans,” interested homeowners will complete a Pre-Applicant Screening Worksheet first. If there are more potentially eligible pre-applicants than funding available, the worksheets will be entered into a random selection process. Homeowners will be randomly selected and invited to apply for EHLP. Unfortunately, some qualified homeowners will not be selected and some will complete an application but not be approved to receive assistance because they do not meet all of the requirements.

The EHLP program is being administered on HUD’s behalf by NeighborWorks America, a national nonprofit organization that, since 1991, has been committed to providing access to homeownership and to safe and affordable rental housing.

Conforming Loan Limit

The current conforming loan limit is temporary, enacted in 2008, and is set expire on September 30, 2011. A day after, on October 1, 2011, the $506,000 limit set by the Housing and Recovery Act of 2008 for King, Snohomish and Pierce counties will take effect. However, this is not guaranteed as the higher limit could still be extended. View limits for other counties.

How will this affect me?

If you’re purchasing a property and anticipate securing a conforming loan, you’ll need to come up with a larger down payment to meet the lower $506,000 loan limit. Otherwise, you’ll be in jumbo loan territory with higher rates. Fortunately, it will not affect the vast majority of Seattle area condo buyers where 85.2% of all condos sold in Seattle during the first half of this year were priced below $550,000.

FHA Loan Limit

In 2008, the FHA loan limit was temporarily increased to $567,500. It, too, will revert to the limit set under the Housing and Economic Recovery Act (HERA) as of October 1, 2011, unless it’s extended by Congress. For King, Pierce and Snohomish counties the FHA loan limit will be $506,000. FHA info and limits for other counties.

How will this affect me?

Today, you can buy a property priced up to $588,000 with FHA, assuming a 3.5% down payment ($588,000 x 0.965 = $567,420 loan amount). As of October 1st, the maximum price will decrease to approximately $524,350 in order to meet the $506,000 loan limit. And, if you’re financing closing costs, then the purchase price will be lower still. However, the net effect is negligible since less than 4% of condos purchased in the first half of 2011 fell within this range.

Keep in mind, the changes aren’t necessarily set in stone, they can still be adjusted. But, if you don’t want to take that chance and if you are in the $524,350 to $588,000 price range and using FHA, or if you’re looking to avoid a jumbo loan, then contemplating a 30-day closing period you have around 50 days to find a home and get under contract by the end of August. However, some lenders may tighten the time frame.

How do the current rates stack up historically? The graph below shows the average annual interest rates for 30-year fixed mortgages over the past 20 years. Even if rates move into the 5′s this year, comparatively, it’ll remain among the lowest we’ve seen for decades.

Did you know that you can obtain a mortgage loan with as little as 3% down with no mortgage insurance?

Wells Fargo Home Mortgage offers a special in-house Community Development Mortgage Program geared towards lower income qualified buyers. In many ways it’s similar to an FHA Mortgage with two distinct advantages for condo buyers:

•  It’s not limited to a small pool of approved condo buildings.
•  It does not have mortgage insurance. This is significant as FHA raised its mortgage insurance premiums on April 18th, increasing monthly payments by as much as $100.

There are a few requirements and restrictions that apply to the Community Development Mortgage Program. These are:

• Borrowers must attend a state certified home buyers education seminar.
• Income is restricted to 80% or below of the HUD Area Median Income, which is $68,400 for King & Snohomish counties. That roughly translates to a maximum purchase of $250,000.
• Credit score as low as 620 with flexible underwriting guidelines.
• Down payment and closing costs assistance is allowed; sellers may contribute up to 3%.
• Does not require reserves.
• Purchase of a principal residence.
• Borrowers not need to be a first-time home buyer.

The program does have a higher interest rate, however, it has a lower monthly payment than a corresponding FHA mortgage. And, for now, mortgage interest is tax deductible.

Example:
      FHA $200,000 Purchase with 3.5% down, 30-year Fixed:
      $193,000 loan at 4.75% equals a monthly payment of $1,340.44.

      CDMP $200,000 Purchase with 3% down, 30-year Fixed:
      $194,000 loan at 5.25% equals a monthly payment of $1,221.28. A savings of $119 per month.

Note: monthly payment includes principal, interest and taxes.

To learn more about the Wells Fargo Community Development Mortgage Program, please contact us and we’ll personally put you in touch with our partners at Wells Fargo.

The net effect of the change is two-fold. First, the monthly mortgage payments will increase. That means more money out of pocket every month. Second, as the cost of the mortgage rises, purchasing power decreases. In this case, not by much; it’s likely less than $10,000. Though, if you’re close to your limit, that could have an effect on how much home you can afford. To avoid the fee increase, buyers should act quickly.

Most FHA buyers will finance a 30-year term with the minimum 3.5% down, resulting in a 96.5% loan to value, and therefore will be subject to the 1.15% mortgage insurance premium.

For a $500,000 loan, the monthly mortgage payment amount would increase $104.

This is the second time in about six months that FHA has increased the monthly mortgage insurance premium. Fortunately, the FHA mortgage insurance premium tax deduction has been extended through 2011, which will help ease the burden. As always, we recommend you speak with your mortgage and/or tax professional to get more detailed information on how the change will affect you.

Don’t forget about the Mortgage Credit Certificate. For qualified first-time home buyers, the Mortgage Credit Certificate tax credit can completely negate the amount of FHA mortgage insurance premium increase.

© The Seattle Condo Blog

In a nutshell, the MCC is a tax credit that returns 20% of a borrower’s mortgage interest payment. Buyers can either claim the tax credit when filing their taxes or adjust their paycheck withholding amount, which will allow them to increase their income every month by a few hundred dollars. By increasing their income, buyers can gain additional purchasing power (up to $20,000*) or tuck the money away if they so choose.

Example*:

Eligibility Guidelines:

• Borrowers must be a first-time home buyer (not owned a home in the previous three years) and complete a Washington State Housing Finance Commission homebuyer education class.
• Conventional, FHA, VA and Rural Development mortgages are eligible.
• Applicable towards the purchase of a single family home, townhome, condos or a permanently affixed manufactured home.
• The home must be a primary residence, so it’s not eligible for second homes or investment properties.
• Maximum income limits apply. For King & Snohomish counties it’s $90,000 for 1-2 persons and $97,000 for 3 + person family.
• The maximum purchase price varies by county. For King County, it’s $450,000 in non-targeted areas and $475,000 in targeted areas. Most of downtown, Belltown, Denny Triangle, South Lake Union, First Hill and South Seattle fall into the targeted area, thus eligible up to $475,000.
• No more than 15% of the residence may be used for business or trade purposes.
• If buyer sells the property within nine years, a recapture tax may apply.
• There is a non-refundable fee of $650. However, that can easily be recouped in a few months.

The Mortgage Credit Certificate program is available through select lenders in Washington State on a first-come, first-served basis. Most of the notable mortgage companies are participating. The MCC credit is available through all of our recommended lenders: Wells Fargo Home Mortgage, Metlife Home Loans, Guild Mortgage and Sterling Savings Bank.

If you’d like to know more about the Mortgage Credit Certificate, drop us a note and we’ll put you in contact with a mortgage specialist.

* Every buyer’s circumstance is different and this amount depends on several factors including loan limit, loan program and interest rate. This is provided for informational purposes, please consult with your mortgage professional for greater details about the Mortgage Credit Certificate.

Dues and Don’ts: Condo owners who get behind on homeowner dues could be in for a nasty surprise | Seattle Met Magazine

…your condo association has the authority to foreclose on your unit if you simply fall behind on your monthly homeowner dues. “People always assume that the only person that can foreclose is the bank,” says Valerie Farris Oman, an associate attorney at the Condominium Law Group. “And that’s simply not true.”

New FHA condo financing rules squeeze sellers | Philadelphia Weekly / Inman News

All of the condo projects that ever received FHA approval were going to have to have those certifications expire as of Dec. 7, 2010, but there were so many projects seeking recertification that it created a crush on FHA’s resources to deal with it,” said Kevin Britt, a Seattle attorney specializing in condo and homeowners association representation.

“The FHA extended the deadline based on when the projects originally received approval. The earliest projects were circa 1972 and had to be recertified by Dec. 31, 2010; the other projects (using five-year increments) had longer deadlines