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Ginnie Mae announced on August 27th this year that they would be removing the limit on mortgage loans guaranteed by the Department  of Veterans Affairs (VA Mortgage Loans)! The limit previously has been capped at $417,000. The memorandum can be found here. This change became effective September 1st, 2007.

I don’t know how I missed this news when it was first published, and I am still surprised there has not been more media coverage. This is potentially big news for VA borrowers, Loan Officers and Realtors® across the nation. Right here in Kitsap County, this could easily reestablish some momentum in our real estate sales.

What this means to Kitsap County VA Homeowners

If you own a home in Kitsap County and you qualify for a VA mortgage loan, but you thought you could not take advantage of refinancing opportunities because the value of your home is too high, think again. With the loan limit removed, you may be able to take advantage of the historically low fixed rate loans VA offers. In addition, unless the lender imposes an add-on fee for exceeding the $417,000 conforming limit, Jumbo Loan borrowers will be able to acquire terrific low interest rates on very large loans. Imagine having a $750,000 mortgage at a fixed rate of 6.00% for 30 years.

What this means to Kitsap County Homebuyers

Kitsap County VA homebuyers, will no longer be limited to the $417,000 ceiling. If a homebuyer wants to exceed that limit, the borrower will need some cash down payment. VA guidelines stipulate that if the loan is above $417,000, the borrower can finance up to 75% of the difference. In other words, on a $517,000 pruchase, the veteran would need $25,000 (plus closing costs and pre-paid items). This scenario would be over the VA limit by $100,000 so the VA would allow financing to be increased by 75% of that or $75,000. The borrower is responsible for the difference. 

What this means for Kitsap County Sellers

Homes for sale above the $417,000 conforming limit, will now be able to be marketed to VA buyers! In the past, with the limitation in place, these properties could not be listed in the MLS as VA. Kitsap County has a very large population of Military families. Sellers in the upper price ranges have not been able to offer their homes to VA buyers unless the buyer was willing to switch away from VA financing.

What this means to Kitsap County Realtors®

Any Realtor® reading this article has already figured out what this could mean for their clients. Their sellers can now offer properties to a larger pool of buyers and their VA buyers can make offers on more expensive homes without the need to switch to conventional or subprime loan programs.

Overall, this is big news. Some questions remain that I have not been able to find answers to yet.

• Will lenders take advantage of this change? (Lenders can, and often do, refuse to participate in available programs)
• Will there be a maximum loan limit set? (Think jumbo and super jumbo loan sizes)
• Will the 25% veteran participation apply to the down payment parameters that lower the VA Funding Fee? (This is the question I really want an answer to)

I will add to this article as the information comes in. You may want bookmark this one and check it for updates.

 

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Posted in Bites of Washington, Bremerton WA Real Estate, Buyers, Gig Harbor Real Estate, Miscellaneous, Mortgage Bites, Port Orchard Real Estate, Poulsbo Real Estate, Real Estate Bites, Sellers, Silverdale WA Real Estate | 5 Comments »

Tags: kitsap va loans, Real Estate Bites, va mortgage loans

If you have never purchased a home, you may never have seen a Good Faith Estimate (GFE). If you have purchased a home, you may not have really looked at it! Many home buyers do no more than glance at their Good Faith Estimate as they sign it planning to take a second look later, and never get around to it.

A Good Faith Estimate is your friend; spend a little time with it.

The process of closing on your new home is exciting but it is also a very busy time. It can be a bit overwhelming to face the stack of documents you find in the Escrow (aka Closing) Office. The Escrow Officer will want to move as quickly as possible and let’s face it, many real estate buyers want to just sign what they need to, trust that everything is as it should be, and drive straight to the new home to pick out paint colors, new plants or attractive furniture! It’s a heck of alot more fun than dealing with paperwork.

You may ask why is there an estimate at closing anyway? Haven’t the lenders and the loan officer gotten exact figures by then? The answer is simply that it is common practice in Washington and other states for the Lender to include a Good Faith Estimate in the packet of Closing Documents. The document you need to rely on as “Final” at closing is called the HUD Settlement Statement. But, I’m getting ahead of the game, lets get back to what to look for on a GFE and how to compare them if you are shopping for a loan.

Closing Costs confuse even experienced borrowers (and some loan officers!). One of the biggest areas of confusion has to do with Pre-paid Items. In general, think of pre-paid items as uncontrollable (kind of like sales tax, you cannot negotiate it) and true Closing Costs as something to watch carefully. Many of the fees (that are not pre-paid items), will vary from lender to lender and can be negotiated (or manipulated by the unscrupulous).

Some of the fees are fixed, such as the Appraisal Fee. The Lender does not establish the appraisal fee, nor does the Loan Officer. It is controlled by the Appraiser. It cannot be “marked up” to increase profitability. Remember one important thing though; a Good Faith Estimate is designed to clarify the financial picture, not cloud it. If you don’t quite understand yours, stop and get your questions answered!

The HUD website has a thorough description of the items you can expect to find on any HUD Settlement Statement. Your loan officer should also be able to provide you with a hard copy of the same publication. This pamphlet is organized by line number. It is a simple matter to compare any Good Faith Estimate by line number with the descriptions found in the HUD booklet. The line numbers on a Good Faith Estimate and on a HUD Settlement Statement are meant to correspond to each other. Keep this pamphlet with you while you compare various Good Faith Estimates. Refer to it as often as you need to. It is your roadmap.

Items To Watch For

Line 801: Loan Origination

Although it has been customary in the past and is common across the US, Washington State’s Department of Financial Institutions (DFI) insists that this line can ONLY be used by the Lender (not the Loan Originator or the Brokerage he/she works for). If you are working with a WA State mortgage broker and you see a fee on this line, challenge it. Unless the mortgage broker can provide proof that the Lender is charging this fee, it must be removed. The fee a mortgage broker charges belongs on line 808.

Line 802: Loan Discount

Any fee you find on this line MUST (again, according to WA’s DFI) be reflected on the final HUD as having been used to “buy down” the interest rate. These funds cannot be used as a source of profit for the mortgage broker. They MUST be passed through to the Lender.

Line 808: Mortgage Broker Fee

This is the fee charged by the mortgage broker and can be negotiated. It is customary for Washington Mortgage Brokers to charge 1 point (think 1% of the loan amount). But as the loan amount rises, the mortgage broker fee percentage falls. Some mortgage brokers charge a flat fee instead of a percentage.

Lines 809 to 8??: Other Fees

This is where you look for possible “Junk Fees”. The items listed below line 809 may or may not include negotiable fees. Check each line carefully and ask questions. Often you will find a Lender Administration Fee. This is not typically negotiable, it is a fee the Lender charges and can often be easily verified. Another common fee is a Processing Fee which can be negotiated. A whole slew of other fees can be found when comparing Good Faith Estimates. Some fees will vary depending on which Lender is being used, others vary depending on the mortgage broker.

Clarity is the Key

A Good Faith Estimate is designed to clarify information. It is meant to itemize all fees a loan officer can reasonably expect to be charged by various parties to close your transaction. A Good Faith Estimate is not meant to confuse. And it shouldn’t look like an endless list of charges. If you feel like you are in the middle of a Ginsu Knives commercial (but wait, there’s more!), slow down and question the need for all the little charges.

The Good Faith Estimate you receive during your initial meeting with a Loan Officer should be very close to what you find on your HUD Settlement Statement at closing. If there are major differences, make sure you question them! 

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This is the tenth and final installment in an on-going series of posts dedicated to helping 1st Time Home Buyers successfully achieve their home purchasing goals.

We have been identifying and discussing, in chronological order, key events in the home buying process. In our last discussion, we indentified several last minute obstacles/difficulties that Buyers may experience in a post entitled, “Potential Pitfalls in the 11th hour.”

This time, we’ll talk about what Buyers can expect in the final days leading up to their closing and what to aniticpate beyond, in an article called, “Are We There Yet?”

Remember back when you were just a kid, and your family took that unbearably long cross-country vacation, all smashed together in an old beat-up the station wagon? And getting to your destination seemed to take FOREVER?

Well, that’s kind of the way it is in the final days leading up to your closing! Well, just be patient, you’re almost there!

Once your loan documents arrive at the escrow company, it’s normally just a matter of the Escrow Officer ensuring that all necessary documentation is prepared and ready for signing. Based on all of their input, they will draft a HUD-1 Statement. This is a projected detailed estimate of both parties (Buyers and Sellers) closing costs. You will receive a copy of this estimate prior to your signing, and so will your Agent. Now is the time to review these numbers carefully, with both your Agent and your Loan Officer, to verify that all the numbers are correct and correspond to what you had anticipated.

The Escrow Officer will contact you to schedule a time for you to come into their office to sign all the closing documents. For most standard residential transactions, you can plan on the signing to take at least an hour, depending on how in-depth you wish to read and review all the documents. The Escrow Officer will instruct you on what you will need to bring to the signing (typically your Driver’s License and any funds necessary to close the transaction),

In some instances, you may have negotiated with the Sellers for them to contribute to your closing costs. In addition, any Earnest Money that you deposited into escrow when you first went under contract will either be applied to your closing costs, or credited back to you at closing. Reviewing your HUD-1 statement will help you to aniticpate whether or not you will need to bring money to your signing. The escrow company usually requires the funds to be in the form of a certified cashier’s check.

One thing many people forget in the final stage of the home buying process is to contact all of the local utility companies and have them switch the billing over to your name. Your agent should be able to provide you with a list of utility companies that serve the property, along with their contact numbers. There are few things more frustrating than moving into your new home and discovering you have no power, water, or gas!

And, depending on the type of property, it might be beneficial for you and your agent to conduct a final walk-thru, prior to closing, just to ensure that everything is as specified per contract.

Now realize that closings can vary significantly from State to State. When we bought our house in Chicago, everyone was there for the signing – our agent, our attorney, the Sellers, their agent, and their attorney. We all sat around the table and passed the documents around for signatures. At the end of the signing, we got the keys to our new home!

Here in Washington State, Buyers typically come in to sign a day or two before the actual closing takes place. The Sellers come in separately, many times on different day altogether. This tends to make the process less intimidating and more comfortable for both parties.

Once you have signed all your documents, they are normally sent overnight to the Lender for final review. In most instances, the following day your loan is funded. Later that same day, the escrow company sends documents by courier to the County courthouse where the new deed is legally recorded. The recording numbers are furnished to the escrow company, and the transaction is officially closed, and the house is YOURS!

Your Real Estate Agent will have made prior arrangements with the Seller’s Agent to obtain the keys. Once escrow has informed them that your loan has been funded and they have recording numbers, the transaction has closed and you can take possession.

Before you begin moving your household goods inside, take time to tour the entire home and premises:

• Verify that you have adequate power, water, and gas servicing the property.
• Are there instruction manuals for all the appliances and primary systems (furnace, water heater)?
• Did the Sellers remember to leave the garage door openers?
• Does your neighborhood have locked mailboxes, and did the Sellers provide you a key?
• Is there a trash can, or will you need to purchase one? Check with your Disposal company to determine acceptable containers.
• As a safety precaution, have all the locks changed as soon as possible.

A good real estate professional never disappears after you’ve closed. There is always something that inevitably comes up after the fact. So don’t hesitate to contact your agent if there are any issues or concerns. Your complete satisfaction and future referral/recommendations are very important!

Enjoy this day! It is truly a momentous occasion! You’ve now joined the ranks of being a ’Homeowner!’ Take some time at the end of your busy day to journal your thoughts and impressions. This is an event you will want to capture for many years to come!

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Tags: 1st time buyers, buying a home, home buying, Real Estate Bites