fbpx
  • Tel: (651) 552-3681
    Email: joe@joemetzler.com

  • Popular Mortgage Loan Programs at a Glance

    Figuring out which mortgage program for buying your home in Minnesota, Wisconsin, or South Dakota can feel very overwhelming. We suggest rather that trying to figure it out on your own, you simply complete a full online mortgage application.

    Once we have your information, we can discuss your overall situation, including your wants, needs, and ability. We will then zero in like a laser beam on the programs you qualify for, how much house you can afford, what the payment might be, and how much money you will need to pull it all together.

    Here is a list of most basic mortgage loan programs in MN, WI, and SD.

    Many other programs available. Call for details

    • Conventional Loans (Fannie Mae and Freddie Mac) / Standard Fixed & Adjustable Rate Mortgages
    • FHA Loans - Just 3.5% Low down payment government loans
    • VA Loans - No down payment for veterans, or up to 100% cash out refinance
    • FHA 203k Loan - Buy a fixer-upper, and get the money to rehab it all in one loan
    • USDA Rural Development Loans - No down payment for homes in rural area or MN, WI, SD
    • JUMBO Loans - Mortgage loans Over current local area conforming loan limit
    • First-time Buyers Programs - Special deals if you've never owned before
    • Down Payment Assistance Programs - Minnesota first time buyer loans. Both MHFA Start Up and Step Up program
    • Bank Statement programs - Use your bank statement deposits for proof of income (self employed people only)
    • No Documentation loans (investment properties only)
    • Self-Employed? - Mortgage Loans for Self Employed people
    • NO Closing Cost Loans - Both purchase and refinance.
    • Interest Only Loans - reduce your minimum monthly payment
    • ZERO Down Payment Loans - Yes, they are available (see VA loans and USDA loans)
    • Bad Credit loans - Minimum 10% down required, and higher rates
  • Popular Mortgage Loan Descriptions

    Conforming Conventional Loans: Conforming long-term, fixed-rate and adjustable loans that "Conform" to basic Fannie Mae and Freddie Mac loan limits, property, and borrower guidelines. This is your 'standard' everyday mortgage loan.

    Conventional Loan: This simply means it is not a government backed loan, like FHA, VA, or USDA

    VA Loans, FHA Loans and USDA Loans: Government insured/guaranteed long-term, fixed-rate and adjustable loans. VA loans are ZERO down payment. FHA loans allows for as little as 3.50% down payment, all of which may be a gift! USDA rural development loans are zero down payment too, but for homes in rural areas.

    Jumbo Mortgage Loans: Long-term, fixed-rate and adjustable loans that EXCEED the conforming limits, which is currently $453,100.

    First-Time Buyers: A first time buyer is someone who has never owned a home, or who have not owned a home in the past three-years.

    First time home buyer programs generally allow for some sort of down payment assistance to those who qualify. You usually still need at least $1,000 or your own money, but you can get an assistance loan for the rest of the down payment. If you are comfortably paying rent, have two years of rental history, OK or better credit, and a few thousand dollars in the bank, you very well could be a homeowner today. We specialize in helping first-time home buyers of all kinds.

    Zero Down Payment Loans:  Ideal for first-time buyers, these low & no down-payment mortgages can help reduce or eliminate nearly every cost associated with obtaining a home loan. These programs typically have slightly higher interest rates which offset the higher risk to the lender, than do regular conforming loans with a minimum of 5% down. VA loans, and USDA Rural development are two zero down payment options.

    Bad Credit Loans: These loans no longer exist. But formerly these were loans for those with a credit score below 620
    No Income Verification Loans. Also known as NO DOC, NIV, Stated income: These loans are making a comeback in the market, but are much different from previous versions. Call for details.

    How To Choose The Right Mortgage Loan for You 

    Choosing the right type of mortgage is not a very easy task. Most people obtain a 30 yr fixed loan. However, this is not always the smartest choice. You may have to do some homework to evaluate your personal financial situation and then determine the features of available loan programs to analyze how they correspond with your needs. I always discuss the details of your situation with you, then present possibly better loan options you may not have been aware of!

    Start by asking yourself these questions: 

    Budget
    What is my current financial situation: income, debts, other expenses: How will that change with a new house?

    Income
    What do I think my future income will be? Are there any plans to change my income stream? Will I be able to absorb future mortgage payment increases?

    Assets
    What types of assets do I have and how much is available for a down payment and closing costs? What will my other purchase needs be when I buy a house and how will I fund those purchases?

    Housing Needs
    Is this a started home, or your dream home? How fast do I want to build equity? What are my long term equity needs (retirement funds, college tuition, etc.)?

    How Long Do I Plan On Living In This Home
    This can greatly effect loan options. Some options make more sense if you will only be in the home a short period, say- under 5-years. Others may make more sense if you plan on living in the home a long time.

    Economic Outlook
    What do I feel will be the direction of future interest rate movements? How confident am I in that view?

    Tax Situation

    Would I benefit from making a "prepaid interest" payment in the form of discount points? What will be the impact of this purchase on my tax situation?

    Risk
    What is my risk tolerance for payment changes? Will I have enough cushion to absorb a 10% payment increase?
    The answers to these questions should assist you in determining which type of loan program you need. A loan program that has a fixed interest rate and a fixed payment for the term of the loan is the most conservative. With an adjustable rate mortgage (ARM) you have the risk of payment increases. However, you may save a lot of money during the initial years with a much lower interest rate.

    Fixed Rate Mortgage Loans
    The most common type of mortgage program where your monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable.
    Popular fixed-rate mortgages are available for 30, 20, 15, and 10 years, but we will let you pick any loan amortization term from 10 to 30-years.

    Fixed rate fully amortizing loans have two distinct features. First, the interest rate remains fixed for the life of the loan. Secondly, the payments remain level for the life of the loan and are structured to repay the loan at the end of the loan term. The most common fixed rate loans are 15 year and 30 year mortgages.
    During the early amortization period, a large percentage of the monthly payment is used for paying the interest . As the loan is paid down, more of the monthly payment is applied to principal . A typical 30 year fixed rate mortgage takes 22.5 years of level payments to pay half of the original loan amount.

    Adjustable Rate Mortgages
    These loans generally begin with an interest rate that is significantly lower that a fixed rate loan. However, the interest rate changes at specified intervals (for example, every year after the first 5-years) depending on changing market conditions. If interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment could drop also.
    Most adjustable mortgage loans are hybrid loans. This means they combine aspects of both a fixed and adjustable rate mortgages. Generally starting at a low fixed-rate for the first 3, 5, or 7-years, then adjusting to market conditions each year afterward.

    Another adjustable loan consideration - If you only plan on being in the home a few years, the lower start rate, combined with the adjustment period, could save you a lot of money with no risk.

    Adjustable loans also have caps that restrict the amount your rate can increase or decrease at the scheduled change dates, as well as caps that restrict the overall maximum rate.

    To fully evaluate an ARM, you must understand the how your loan can adjust, and when. Key features with an ARM program that need to be analyzed include the type of index, life and payment change caps, margin, fully indexed rate, negative amortization, start rate, discount points, conversion to fixed rate options, and payment change frequency.

    Bi-Weekly Payments
    Setting up bi-weekly payments is available on all loans. By making automatic bi-weekly payments, you shorten the loan term dramatically, saving you a lot of money. Since there are 52 weeks in a year, you make 26 payments, or 13 "months" worth, every year. This chops the average 30-year loan to around 23-years.

    Jumbo Mortgage Loans
    Jumbo conventional loans are simply mortgage loans with loan amounts over $453,100. We offer a number of loan programs which include fixed rates as well as adjustable rates. Maximum loan amounts vary depending on loan to value ratios. Down payment requirements increase as the loan size increases. For example, you may be able to get a $700,000 loan with 20% down, but a $2,000,000 loan will likely require 30% down. Credit scores also effect loan size. For example, you may be able to get a $700,000 loan with a 680 credit score, but a $1,500,000 loan may require a 740 score. These are just examples. Contact us at (651) 552-3681 for actual options available in your situation.
    ARM Loan Options (Adjustable Rate)

    We offer a variety of adjustable rate programs. Criteria for these programs will vary depending on specifics, but the basic programs are as follows:

    • 1/1 ARM -- Fixed rate for 1 year and adjusts each year thereafter
    • 3/1 ARM -- Fixed rate for 3 years and adjusts each year after the third year
    • 5/1 ARM -- Fixed rate for 5 years and adjusts each year after the fifth year
    • 7/1 ARM -- Fixed rate for 7 years and adjusts each year after the seventh year
    • 10/1 ARM -- Fixed rate for 10 years and adjusts each year after the tenth year

    Balloon Loans - Fixed rate payment (based on 30 year loan), full balance due in 5 or 7 years.

    All of these ARMS are based on the 1 Year Treasury Index and all have an annual as well as a "lifetime" cap. Contact me for additional information. Call (651) 552-3681 or EMAIL me with your questions.

    Other Mortgage Loan Considerations 

    Down payment requirements
    Down payments requirements vary depending on the type of loan program selected. Standard conventional loans need at least 5% down payment. FHA programs allow for a small down payment of just 3.50%. Investment properties typically need 20% down payment, and second homes require 10% down payment.

    Mortgage Insurance
    Conventional loans require mortgage insurance unless you put down at least 20%. If you are not putting 20% down, PMI has to be dealt with somehow. There are four basic options. Standard monthly PMI, Lender Paid, Single Premium, or two loans. Lender paid, single premium, and two loans can lessen the impact of conventional mortgage insurance costs if you qualify. Ask you loan officer for details of how these options work, and do they make sense for you.

    TIP: Any lender claiming no mortgage insurance on a loan that should have mortgage insurance is usually doing a lender paid mortgage insurance option. This means they charge you a higher interest rate on the loan versus monthly mortgage insurance.
    Standard conventional mortgage insurance goes away automatically at 78% loan-to-value, but you can also ask to have it removed if you've paid it for at least two-years if you think you are below 80% loan-to-value.

    FHA loans have mortgage insurance regardless of the down payment size. If you put less than 5% down, the mortgage insurance is for the life of the loan. If you put 5% or more down payment, the mortgage insurance is for at least the first 11-years.
    USDA loans have low mortgage insurance costs compared to other loan, but it is on the loan for the life of the loan.

    Paying Discount Points
    Discount points is money you pay up-front at the time of closing to lower the normal interest rate you would have paid. One point equals one percent of a new loan amount. If a new mortgage calls for two points, it means that two percent of the amount of the loan needs to be paid to the lender up-front at closing. Note that points are calculated on the amount of the new loan, and not on the sale price of the property.

    Most regular lenders quote a 'PAR' rate. This is the interest rate where you pay NO POINTS. We see a lot of internet lenders advertising rates that include you paying discount points.
    Paying discount points is neither good nor bad. Rather it all depends on your personal situation. Ask yourself what the monthly savings will be on the loan, and divide that by the additional cost of the discount points. Next ask yourself how long do you plan on being in the home. Now do some math. For example if the additional cost is $1500, and your monthly payment difference is just $15, it would take 100 months to save the initial cost. That is 8.3 years. If you plan on being in the home less that 10-years, was it worth it? How about if you were going to be in the home an estimated 20-years.

    View our interactive live MN, WI, and SD interest rates to see what rates and costs would look like for you. Then only you can decide if discount point makes sense for you.

    Closing Costs
    All mortgage loans have closing costs, and all lender closing costs are essentially the same, regardless of what anyone tells you. How you pay the closing costs, and what a lender shows you can vary greatly. Click HERE to review a breakdown of mortgage closing costs.
    Generally speaking, all loans also have very similar costs, but there may be slight variations depending on the loan program.

    Interest Rate Locks
    Rates may be locked anywhere during this process, from time of application until about 10-days prior to closing. We do not make the lock decision for you, but will help guide you in your decision based on our experience. The standard rate lock is for 60-days, which means your loan must close within the next 60-days. Other popular options are for 45-days, or 30-days.

    Cash out finance
    You may be able to get 'cash out' against the value of you home for any reason. Loan to value limitations apply.