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You should consult with one or more lenders (not all lenders are alike and here's why you
should work with your local mortgage broker).  Lenders are to educate your home financing options and to help you navigate the loan process (thus their availability when you need them is at utmost important).  

a) What type of loans do you offer?  You may qualify for either a VA, USDA, Conventional,  or FHA loan. It all depends on your circumstances such as your FICO score, down payment and subject property. 

b) What is the interest rate and Annual Percentage Rate (APR)? As a general rule - you want the difference between the rate and APR to be as little as possible - indicating minimum junk fees and closing costs. 

c) How large does my down payment need to be for each loan?  Down payment can be as little as 3% with FNMA HomePath or 0% with VA and USDA loan. 

d) What is earnest money? An earnest-money deposit is a guarantee that you the buyer will fulfill the contract. If the transaction cannot be closed because the buyers fail to fulfill their part of the contract, the sellers retain the earnest money deposit.  Earnest money deposit must be made from seasoned funds (funds already deposited in your account for at least 2 months). Cash earnest money deposit is not acceptable. 

e) What is an impound account? Please read more here

f) What is an escrow? Please read more here

g) What fees and closing costs will I have to pay? Closing costs can generally be broken down into 2 parts:  

i) Customary closing costs such as an appraisal, credit report fee, title policy, escrow and recorded fees and taxes. 
ii) Prepaid items such as property insurance, property taxes and per diem accrued interest charges.  This part is indifferent from lender to lender.  Here's more information on closing costs. Since implementation of TRID in 2015, lenders are required to deliver a Loan Estimate within 3 days of receiving your completed loan application.   

h)  Do you charge origination charges?  As your mortgage broker, our commission is being paid by our lenders. We do not charge origination charges.   

i) Do you offer loan-rate locks? Lenders generally offer from 15 to 120 days lock. As a general rule, the higher the lock days, the costlier the lock fee is. 

Not all lenders are alike - mortgage rates are a good comparison and equally important are customer service and ability to close on time. 

Posted by Sam Kader on June 7th, 2019 9:57 AM

With 2018 Tax Reform Bill - one area of change that affect most of homeowners is whether mortgage interest on first, second or equity line mortgage is still tax deductible.  As of IRS last publication 936 (2018) - it depends on several criteria (see Figure A - flowchart below). As always, you should consult with your accountant for clarity. 

In summary – most married couple would still be entitled to deduct their mortgage interest for mortgage balances up to $1,000,000. 

Posted by Sam Kader on February 2nd, 2019 10:59 AM
Buyers who put down less than 20 percent down payment are required to pay Private Mortgage Insurance (PMI). The Homeowners Protection Act of 1999 requires lender to inform borrower when they can cancel coverage. On August 4th 2015 - the CFPB bulletin further clarifies some requirements of the Homeowners Protection Act and is intended to help servicers comply with the law but does not create any new rules or requirements. 

Here are 4 ways on how PMI can be removed: 

  1. PMI can be cancelled once the loan to value is 80 percent or less base on the original purchase price or appraised value - whichever is less. Automatic cancellation can also happen once 22 percent equity is reached (for mortgages with terms of 30 years or more).
  2. Get a new appraisal instead of the original purchase price or appraised value when deciding whether you have 20% equity threshold. 
  3. Remodel to increase value such as adding a room, kitchen or bathroom upgrades. Then ask the lender to recalculate your Loan-to-Value (LTV) ratio using the new value figure. 
  4. PMI may cancelled during the first 5 years under the following conditions:  mortgages with terms of 15 years or less and the LTV reaches 78% or less. In order to determine whether the threshold has been reached according to the Federal Reserve Board -  follow the following steps: 
  • Step 1: Multiple the present value of your mortgage by 1.25. 
  • Step 2: Ascertain the purchase price or appraised value of your property. 
  • Step 3: If the value in step 1 is larger than in step 2, PMI will continue. If the value in step 1 is smaller than in step 2, you may request for PMI cancellation.  
In January 2015 - FHA announced that FHA mortgage insurance is now required for life of the loan. The only way out is to wait until you have 20% equity and to refinance into Conventional Financing.  

Here's what you should do to request PMI cancellation:

  1. You must request for cancellation in writing.  You should receive an annual letter from mortgage servicers who to call for information about cancelling mortgage insurance.
  2. You have to be current on your payments and have a good payment history.
  3. You must not have any subordinate liens of your property.
  4. You might have to get an appraisal to demonstrate that you have at least 20% equity. Estimate how much your house is worth using Zillow or contact me for a copy of your Comparative Market Analysis.

If you have a problem with a lender over PMI cancellation, contact the Federal Trade Commission and Washington state's attorney general.

Posted by Sam Kader on January 27th, 2019 9:23 AM
Here in Washington state - property taxes are due twice a year - first installment is due on April 30th and second installment is due on October 31st.  Every time we hear a story of property prices are falling - the same question prevails: What does it mean for my property taxes? The short answer is it does not have any immediate impact on your property tax bill. 

What happen in current year is you or your mortgage company (depending whether you have an impound account or not) will receive the first half of your current property tax bill sometime in February. The first thing to know is that county assessors by law peg your tax bill to your home's value determined from about one year ago since they need the full year to go around figuring out the values of all 715,000 parcels in the county. That means the bill you will receive in February of every year will reflect the assessed value of your house as of Jan 1st of the prior year.  So by the time you receive your first installment notice - the property value of your assessed home is about 16 months old.  

Well - how about the following year? Will the softening market reduce tax bill then? Not necessarily (disappointing isn't it?).  According to the Assessor's Office - changing in home values are the least impactful ingredient in the changes to the stew they use to set property bill.  The actual process of how property tax bill is calculated is a bit confusing. Essentially, the assessor calculates how much money each public agency (from cities to schools to fire districts) gets property-tax revenue is due then the county works backward to charge property owners a certain amount based on their property's value to generate the total taxes that each property owner pays. Since Washington state does not have state income taxes - our property tax rates are generally higher than states that do have state income taxes.  

Here's an example of how it works: Let's say a school district is due $100 in property-tax revenue this year. There are two properties in the district - a green house worth $250,000 and a blue house worth $750,000. The owner of the green house which has one-fourth the district's total value pays $25 and the blue house pays $75. The next year, the district would be allowed to charge 1 percent more or in this case the green house would pay an extra 25 cents and the blue house another 75 cents. Should the value of the green house catches up (though renovation or upgrades) and becomes worth the same amount as the blue house then the $100 bill would be split evenly.  The county's appraisers usually come out and visit/drive-by each home once every six years to "reset" the home's value.  Thus, you may notice an especially large bump once every six years.  The other years the assessor relies mostly on nearby sales and market values to determine the assessed value.  

In general, those districts by law are not allowed to raise the revenue they generate by more than 1 percent each year. However, voters and public officials can override that cap with special taxes. For example, the voter-approved Sound Transit expansion in 2017 was  a big reason taxes went up in 2017.  

Should you feel that your property was overly assessed by the county, you can appeal your property-tax assessment - though only one-third is successful. If homeowners are 61 or better as of Dec. 31 of the previous year who own a home and make less than $40,000 may qualify for an exemption or deferral as do some disabled homeowners.  Please call County Assessor's office at 206-296-3920 to apply. 

Posted by Sam Kader on January 23rd, 2019 12:27 PM
Some things get more valuable with age like fine wines and real estate. The longer you keep them the more valuable they get. In real estate, homeowners should stay put for at least five (5) years before selling their property or risk loosing money. The reason for this 5
 year rule is that closing costs and real estate commissions required to buy and sell will consume between 7% to 10% of the cost of the house. Because real estate usually appreciates slowly, the longer you keep the house the more money you stand to make. As a general rule, 2 percent per year market appreciation is normal and 3 to 4 percent is a hot market.  We are lucky in Seattle where market appreciation has been double digits.  The average closing costs range from 2% to 5% of the cost of the house. Selling a house is often more expensive than buying one. The real estate commission alone can suck up 4% to 6% of the home's sale price. 

Should you need to move within the first 5 years of buying your house, consider renting it out. Generally, rental income is sufficient to cover for your mortgage payment.  If your homes are in vacation worthy locations like on the beach or near popular tourist attractions, you can also rent it out via platforms such as Airbnb or bookings. However, you should know local laws governing these kinds of rental. 

If you don't plan to on being in the house for more than five years, then you should seriously consider renting. 

Posted by Sam Kader on December 16th, 2018 6:40 PM



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