Shop around

Loan packages are not all alike, so shop around and compare lenders.  Approval standards are far stricter than they've been in years, and there's new language in the Finance Contingency which states that once under contract, a Buyer must have the Seller’s written consent to change lenders. Without it, the buyer is in breach of the contract, which waives the finance contingency and could blow up the deal. 

It's important to know all costs associated with the loan. They vary from lender to lender and can include expensive "junk fees" which can pile up over time.

A pre-approval letter from your lender does not assure you’ll get the loan. Your file goes through final underwriting just prior to closing to look for any changes that may raise red flags or change your debt ratios. Here are some don'ts:

  •  Make any large unexplained deposits into bank accounts unless the deposit is a documented gift.
  • Change or quit your job, or become self-employed without a discussion with your loan officer.
  • Max out your credit cards or apply for new ones leading up to applying for your mortgage or during the process before closing.
  • Move money around or make any adjustments or transfers in your asset picture. Refrain from changing investments, moving positions, opening or closing accounts.

 Types Of Loans
Conforming Loans

Fannie Mae and Freddie Mac are private corporations (and government sanctioned monopolies) whose purpose it is to provide a continuous flow of funds for qualified home buyers, and of course to enrich their stockholders. They do it by buying “bundled” loan packages from home mortgage lenders, then re-packaging them into securities which are then sold to investors. They make their profit and the banks free up capital for new loans. The FMs establish borrower credit and income requirements, down payment amounts, and suitable properties. They review and reset new loan limits every year. The 2018 conforming loan limit for first mortgages in King, Snohomish and Piece counties is $667,000 for single family homes.  Jumbo Loans - those above Fannie Mae and Freddie Mac limit - typically have a higher interest rate. though recently many attractive packages have become available.

ARMs;  The Risks and Rewards

Mortgage interest rates generally come in two flavors: fixed and adjustable. A fixed rate allows you to lock in your interest rate for the entire mortgage term. That’s attractive if you’re risk-averse, on a fixed income, or when interest rates are low.

An adjustable-rate mortgage does just what its name implies: Its interest rate adjusts at a future date listed in the loan documents. It moves up and down according to a particular financial market index, such as Treasury bills. A 3/1 ARM will have the same interest rate for three years and then adjust every year after that; likewise a 5/1 ARM remains unchanged until the five-year mark. Typically, ARMs include a cap on how much the interest rate can increase, such as 3% at each adjustment, or 5% over the life of the loan.

Why agree to such uncertainty? ARMs can be a good choice if you expect your income to grow significantly in the coming years. The interest rate on some—but not all—ARMs can even drop if the benchmark to which they’re tied also dips. ARMs also often offer a lower interest rate than fixed-rate mortgages during the first few years of the mortgage, which means big savings for you—even if there’s only a half-point difference.

But if rates go up, your ARM payment will jump dramatically, so before you choose an ARM, answer these questions:

  • How much can my monthly payments increase at each adjustment?
  • How soon and how often can increases occur?
  • Can I afford the maximum increase permitted?
  • Do I expect my income to increase or decrease?
  • Am I paying down my loan balance each month, or is it staying the same or even increasing?
  • Do I plan to own the home for longer than the initial low-interest-rate period, or do I plan to sell before the rate adjusts?
  • Will I have to pay a penalty if I refinance into a lower-rate mortgage or sell my house?
  • What’s my goal in buying this property? Am I considering a riskier mortgage to buy a more expensive house than I can realistically afford?
FHA Loans

The Federal Housing Administration (FHA). which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory limit.

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan. VA-guaranteed loans are obtained by making application to private lending institutions.

Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first time buyer. These programs are typically more lenient on the qualification guidelines and often designed with lower upfront fees. Also, there are often loan assistance programs offered at the local or state level such as MCC (Mortgage Credit Certificate) which allows you a tax credit for part of your interest payment. Most of these programs are fixed rate mortgages and have interest rates lower than the current market rates.

Use the form below to calculate various mortgage scenarios.

Enter Information
  INPUT INFORMATIONPurchase Price:  $     
 Down Payment:  $     
Annual Interest Rate:   % 
Number of Years:  yrs
  TOTALSMonthly Payment Before Taxes & Insurance:  $     
 Monthly Payment After Est. Taxes & Insurance:  $     

Calculate Maximum Monthly Payment & Maximum Purchase Price

Use the form below to calculate your maximum monthly payment & maximum purchase price.

Enter More Information
  INCOMEAnnual Gross Income:  $     
 Credit Cards/Loans:  $     
Autos:  $     
Other:  $     
  MORTGAGE INFORMATIONDown Payment:  $     
 Annual Interest Rate:   % 
Number of Years:  yrs
  TOTALSMaximum Monthly Mortgage Payment:  $     
 Maximum Purchase Price:  $     
 AGGRESSIVE TOTALSMaximum Monthly Mortgage Payment:  $     
 Maximum Purchase Price:  $