Ecology Director Maia Bellon signed the final approval for the City of Seattle’s Shoreline Master Program on Monday June 1, 2015. The updated SMP will go into effect on June 15, 2015!

A process that began nearly 8 years ago is finally coming to completion.  In 2007, the Department of Planning and Development began a process to update the Seattle Shoreline Master Program. This process would see Seattle Houseboats placed in a very precarious position.

The Department of Planning and Development was charged with updating the Seattle Shoreline Master Plan, which was previously updated in 2005. Seattle’s SMP controls development and use of the shorelines in Seattle waters including floating homes and other floating residences.

Lake Union Liveaboard Association (LULA) was formed in 2009 as a result of changes proposed for the new SMP, which could have potentially eliminated Houseboats in Seattle. For the following 5 years, LULA fought hard to change the SMP to deal fairly with Houseboats. In January, the Seattle City Council passed the SMP, which placed restrictions on Vessels being used as dwelling units, and interpreted this to mean Houseboats as well. This meant Sea Trials, demonstrating navigation, certification by Naval Architects, and a host of other restrictions.

As the City was passing the SMP and submitting to Ecology for review, LULA went to state regulators and got a bill passed that created a new term “Floating On-Water Residences” and protected those Floating On-Water Residences that had been in existence prior to 7/1/2014 from adverse regulations.

As a result of the new law, the City of Seattle was forced to revise the SMP to accommodate Floating On-Water Residences and to treat them as conforming uses in the city.  This required significant changes to the SMP. The city was required to remove many requirements, including Sea Trials, Freeboard, Naval Architect certifications, Navigational equipment, Boarding locations, cleat locations, Hull shape, Propulsion systems, Steering systems, and more.

In addition, the City was required to allow Floating On-Water Residences to be maintained, repaired, remodeled, and replaced in accordance with the new law.

What does this mean for Houseboats in Seattle?

• A structure will be considered a Floating On-Water Residence if it was moored pursuant to a lease or ownership interest in a Marina within the City, prior to July 1, 2014
• Houseboats are required to be verified as Floating On-Water Residences
  • Applicants will pay a one-time fee to receive a verification number
  • Submit an application for verification with pictures, dimensions, a sketch, and proof of moorage in the City prior to July 1, 2014.
• Verification Numbers will assigned and must be displayed in a prescribed manner on the Floating On-Water Residence.
• Houseboats may be expanded with height restrictions, but may not change in footprint size.
• Expansion is allowed subject to height limitations and is limited to 120 square feet, unless graywater is contained and disposed of properly or the Floating On-Water residence is connected to a City waste-water system.
• Houseboats may be replaced, but are subject to the same footprint, height, and expansion requirements.
• A one-time expansion of footprint is allowed for safety reasons, as certified by a Naval Architect. If footprint is expanded, no other expansion may occur.
• Open Railings may be added to decks and stairs, but if over height restriction, are limited to 36 inches.
• A Floating On Water Residence may be relocated and owners should update verification records within 60 days. Failure to update may result in enforcement action, but does not forfeit right to maintain the Floating On-Water Residence.

Faith Lumsden, Compliance Director at DPD has indicated that the verification process will be available online as of 6/15/2015 and that the forms will be available online.  She also indicates that DPD will try to create some press as an outreach program, to help spread the word.

Floating On-Water Residences May Be Sold By Licensed Real Estate Brokers

Separate from the Shoreline Master Program, a new law goes into effect July 24th, 2015, which permits licensed Real Estate Brokers to list and sell Floating On-Water Residences without having to have a Vessel Dealer License. This law affects Floating On-Water Residences statewide, although the vast majority of Floating On-Water Residences are located within Seattle city limits.

The state definition of a Floating On-Water Residence is:

“floating on-water residence” means any floating structure other than a floating home that: (i) Is designed or used primarily as a residence on the water and has detachable utilities; and (ii) whose owner or primary occupant has held an ownership interest in space in a marina, or has held a lease or sublease to use space in a marina, since a date prior to July 1, 2014.

We can break down the criteria for being a Floating On-Water Residence:

• It a floating structure, other than a floating home
• It is designed as a residence on the water -OR-
• It is used primarily as a residence on the water
• The owner or primary occupant has held an ownership interest in space in a marina prior to 7/1/14, -OR-
• The owner or primary occupant has held a lease or sublease to use space in a marina prior to 7/1/14

From this you can see that most houseboats, house barges, and many vessels will qualify as Floating On-Water Residences.

Please visit www.Seattle-Houseboat.com for more information about Houseboats.

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When buying a home, it is not enough to just “come up” with the money. With the exception of “no asset verification” loans, lenders want to verify where the money comes from. If you can document the funds comes from your personal savings, the lender is more confident of your strength as a borrower.

In addition, if you can verify you have additional assets that are not needed for the down payment, it is important to document those, too. Additional assets are “reserves” you can draw upon during times of trouble, such as unemployment, medical emergencies, and similar occurrences. Additional assets can also help to document that you have a history of saving money, which makes you a more dependable borrower.

It is extremely important to completely document the paper trail of any funds you use for down payment and closing costs. The sections below provide guidance on both verifying assets and documenting them as a source of your down payment.

Checking, Savings, & Money Market Accounts

The quickest and easiest way to document funds in your bank account is to provide your lender with copies of your most recent bank statements. Most lenders request two months bank statements, but some still ask for three. Some lenders still send a “Verification of Deposit” to your bank in order to determine your current bank balances and average balance for the last two months. However, that is the old way of doing business and most lenders nowadays prefer to have bank statements.

If the money you are using for the down payment and closing costs has been in the bank for the entire period covered by the bank statements, you’re fine. These are known as “seasoned funds.” However, if your statements show any large or unusual deposits the lender will ask you to explain them and document their source.

Stocks, Bonds, Mutual Funds, etc.

Most of those who own stocks get a monthly or quarterly statement from their brokerage. You will need to supply statements for the most recent sixty or ninety days in order to document these assets.

Though it is rare nowadays, some people actually have stock certificates instead of having a brokerage account. When this is the situation, make copies of the certificates and provide those copies to your lender. You might also want to supply tax records to indicate you have owned these stocks for some time.

If part of your down payment will come from the sale of stocks and investments, you will need to keep all documentation that applies to the sale. Provide these copies to your lender as well.

Gifts

Especially when buying a first home, some borrowers need help coming up with the down payment. This help should come in the form of a gift from a close family member. Lenders will require the donors to sign a special form called a “gift letter.” The gift letter states the relationship between the parties, the address of the purchased property, the amount of the gift, and sometimes the source of the funds used to make the gift. The gift letter also clearly states that the funds are a gift and not required to be repaid.

With most lenders, the donor will have to also provide evidence that they have the ability to make the gift. This can be in the form of a bank or stock statement to show they have the funds available. You should also make a copy of the check used to make the gift and keep a copy of the deposit receipt when you deposit the gift funds into your bank account or escrow.

401K or Retirement Accounts

It is important to provide documentation about your retirement accounts or 401K programs because this is another asset you could draw upon as reserves in case of a problem. It is also another way to show you have a savings history. Just provide a copy of your most recent statement to your lender.

Many people use these accounts as a source of funds for their down payment, too. Some employers allow you to “cash out” a portion of the 401K and some allow you to borrow against it. Be sure to keep copies of all paperwork involving the transaction. If they cut you a check, be sure to make a photocopy of that, too, including any receipt for deposit into your personal bank account.

If you are borrowing against your 401K, some lenders will count this as an additional debt to go along with car payments, credit cards and other obligations. This may seem kind of silly because you are borrowing your own money, but from the lender’s viewpoint it is still a monthly obligation that you must come up with and should be taken into account. If you are “tight” on your debt-to-income ratios in qualifying for a home loan, this could be an important consideration. It may affect whether you choose to cash out the account and pay any tax penalty, or simply borrow against it.

Employers

Some companies provide down payment assistance for their employees. They may feel that Homeowners are more stable and reliable employees, or that providing down payment assistance fosters an environment of higher morale and loyalty to the firm. Just make copies of all the paperwork, including a copy of the check and the receipt when you deposit the funds into your personal bank account. It is important that these funds do not require repayment.

Savings Bonds

If you have Savings Bonds, they are a financial asset, too. Since you hold the actual bonds in your possession, the easiest and best way to verify them for your mortgage lender is to make photocopies of them. If you choose to cash them in for down payment or closing costs, you should do this at your local bank. Be sure to keep copies of the paperwork the bank provides because that will establish the current value of the bonds and show that you received their cash value.

Personal Property – Cars, Antiques, etc.

Personal property includes automobiles, vehicles, boats, furniture, collections, heirlooms, antiques, art, clothing, and practically everything you own except for real estate. The mortgage application asks you to estimate the value for these items.

The larger the loan amount, the more important it is for you to provide details on your personal property. This is because larger loans usually indicate larger incomes, and lenders check to see if your personal property matches your income. If it does not, this sends a “red flag” to the underwriter and they take a closer look at your application.

You are not required to document the value of personal property unless you intend to sell them to come up with your down payment.

Selling Personal Property

For those Homebuyers who do sell personal property in order to come up with their down payment, the verification process can be arduous. Lenders are much stricter about documenting this method of coming up with your source of funds.

Selling a car is perhaps the easiest to document. First, you need to photocopy the registration that shows you actually own the vehicle. You will have to provide a copy of the page in the “Blue Book” that shows your model and its value. Then you need to photocopy the bill of sale showing the transfer to another individual and a copy of the check used to purchase the vehicle. Do not get paid in cash because that makes it impossible to show you actually received the funds. Make a copy of the receipt when you deposit the funds into the bank.

Other types of personal property are more difficult because you have to show that you actually own the property and that it actually has the value that you sold it for. This is a little harder to do for most assets than it is for automobiles.

If you have records to show you purchased the property, that would be helpful. You could also provide an old inventory that documents ownership. To determine value, you may have to contract with an independent appraiser or a specialist who has the knowledge for that particular type of property.

If you cannot document the item’s value, the lender will not view the sale as an acceptable source of funds. Just like selling a car, you have to prove you own the item, make a copy of the bill of sale, copy the check used to purchase the item, and make a copy of your receipt when you deposit the funds into your bank.

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Your First Step Toward Buying a Home

When preparing to buy a home, the first thing many Homebuyers do is look at “homes for sale” ads in newspapers, magazines and listings on the internet. Some potential buyers read “how-to” articles like this one. The next thing you should do – before you call on an ad, before you talk to a Realtor, before you shop for interest rates – is look at your savings.

Why?

Because determining how much money you have available for down payment and closing costs affects almost every aspect of buying a home – including how you write your purchase offer, the loan programs you qualify for, and shopping for interest rates.

Mortgage Programs

If you only have enough available for a minimum down payment, your choices of loan program will be limited to only a few types of mortgages. If someone is giving you a gift for all or part of the down payment, your options are also limited. If you have enough for the down payment, but need the lender or seller to cover all or part of your closing costs, this further limits your options. If you borrow all or a portion of the down payment from your 401K or retirement plan, different loan programs have different rules on how you qualify.

Of course, if you have enough for a large down payment, then you have lots of choices.

Your loan choices include such varied programs as conventional fixed rate loans, adjustable rate mortgages, buydowns, VA, FHA, graduated payment mortgages and all the varieties of each.

Shopping Rates

A very important reason you need to have at least some idea of your down payment is for shopping interest rates. Some loan programs charge a slightly higher interest rate for minimal down payments. Plus, the interest rates for different loan programs are not the same. For example, conventional, VA, and FHA all offer fixed rate loans. However, the rates vary from one program to another.

If you shop lenders by phone, the loan officer will be able to tell which programs fit and quote you rates accordingly. However, if you are shopping on the internet, you have to have some idea of your loan program on your own.

Writing Your Offer

Another reason you need to have a clue about your down payment is because it affects how you write your offer to purchase a home. Not only are you required to put your down payment information in the offer, but different loan programs have different rules which also affect how you write your offer. This is especially important when dealing with FHA and VA loans.

If you are asking the seller to pay all or part of your closing costs, you have to be certain your loan program allows what you are asking. For smaller down payments, lenders allow the seller to pay less closing costs than for larger down payments. Some loan programs will allow a seller to pay certain types of costs, but not others.

Finally, your down payment also affects your ability to qualify for a loan. When you make a small down payment, lenders are fairly strict about having you conform to their underwriting guidelines. For larger down payments, they will tend to make allowances or exceptions to the rules.

Conclusion

As you can see, the down payment affects every choice you make when you buy a home. Although you should look at ads, familiarize yourself with neighborhoods, learn about prices, and read as much as you can – when you get ready to take action – the first thing you should do is figure out how much money you have available for the purchase.

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Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.

Why do I need to purchase a new title insurance policy on a refinanced loan?

To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that their new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender.

Why does a Lender need title insurance?

Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae.

FannieMae, in order to protect its security interest in the loan, requires title insurance coverage. Even those lenders who keep original loans in their portfolio are wise to get a lenders policy to protect their investment against title related defects.

When I purchased my home, didn’t I also buy a lender’s policy?

Perhaps. Who pays for the lender’s policy on a purchase loan varies regionally and by the terms of individual contracts.
However, even if you did buy a lender’s policy when you purchased your home, the lender’s policy remains in force only during the life of the loan that was insured. If you refinance, the old loan is paid off (the “life” of the loan expires) and a new loan is issued for which the lender will require a new title insurance policy.

What about my original title insurance policy?

When you bought your home, you purchased a Homeowners title policy. The Homeowners’ policy stays in force as long as you or your heirs own the home. When you refinance, your lender will often require that you purchase a new lender’s policy to protect their new security interest in the property. Thus, you are buying a policy to protect your lender, not a new Homeowner’s policy.

What could possibly have happened since I purchased my home which warrants a new lender’s policy?

Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanic’s liens, child support liens or legal judgments recorded against you – events that could result in serious financial losses to an unprotected lender. Regardless if it has been only 6 months or less since you purchased or refinanced your home, a myriad of title defects could have occurred. While you may not have any title defects, many Homeowners do. The only way for a lender to adequately protect itself is to get a new lender’s policy each time you purchase or refinance your home.

Are there any discounts available for title insurance on a refinance transaction?

Yes. Title companies offer a refinance transaction discount or a short-term rate. Discounts may also be available if you use the same lender for your refinance loan and your original loan. Be sure to ask your title company how they can save you money.

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It used to be that buyers could go house shopping and when they have found their dream home, then they go to get pre-approved. However, in today’s market, that has proven to be one of the least effective methods in landing the dream home.

Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be.

A pre-qualified letter is not verified and in essence, does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property.

In addition to being pre-approved, it’s important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders.

Some lenders to avoid: those who lose a form or misplace a file, those who gather information from you in an unorganized manner, those who are not informed about interest rates, points or costs, and those who cannot provide you with the right information.

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