NO Closing Costs Loans COST Money

I constantly receive requests for a No Cost loan. Sadly there is no such thing.

All loans have closing costs associated with putting the loan together.

Just like you, participants in the mortgage loan process don’t work for free. The Appraiser, Title Officer, Title Insurance, County Recording Fees, Minnesota Mortgage Registration Tax, as well as your lender all need to get paid as part of the process.

Each of these parties charge fees for their service in processing and funding your loan. The Lender’s responsibility is to explain to you what the services and costs are, and to give you an estimate of the total costs when you apply for a loan. This estimate comes in the form of a document titled Good Faith Estimate of Closing Costs. It is only an estimate, but it should be very close to your actual costs. Lenders are not allowed to pad, or add onto the costs charged by these other parties, but rather simply pass on what they charge. The vast majority of closing costs go to third parties, not your actual lender.

The real question is: How do I get a loan so I don’t have to pay for these required services? The simple answer is you can’t. What you can do is determine how they get paid.

Purchasing or refinancing, it basically works the same way. All of the costs associated with transaction are paid in one of four ways: By you in cash, by the Seller (in a purchase), by rolling it into the new loan amount (refinance), by the Lender, or a combination thereof.  The most common way in a refinance is by rolling the closing costs into the new loan amount.

Now you may be saying “Wooh-Hooh, let the lender pay”, but you need to know how the lender can do this, and why it may not always be such a smart move.

To have the lender pay your closing costs, you agree to accept an interest rate that is higher than what is considered a “Market Rate.” In doing this, the lender receives more cash than just the face amount of the mortgage loan when they sell it to an investor on the secondary market. This excess cash is what the lender uses to pay some or all of your closing costs. This means that over the life of the loan, you will be paying more interest to the lender than you otherwise could have.

Does this strategy make sense for you? Maybe. It depends on several factors. How much higher is the mortgage rate and what is the monthly cost to you in increased payment? How big or small is the loan? How long do you plan to stay in this loan? Do I have the cash to pay the costs out of pocket?

This is where it becomes important to work with a Licensed Mortgage Originator and not a bank employee. As I have said many times, A Mortgage Banker / Broker is required to be Trained, Tested and Licensed in all aspects of Mortgage Origination. A bank employee is usually just registered, not tested, not licensed, and not required to be educated, tested, or licensed.

A NO COST loan is not automatically good or bad.

A local licensed Loan Officer will do the math with you, and take the time to show you the pros and cons of each method of paying closing costs so you can choose the best option in your particular situation.


Top two myths about Real Estate Agents

With millions of web sites to look at for home for sale listing, it is becoming more and more common for people to feel they don’t need the help of a licensed Real Estate Agent.

More specifically, people seem to ONLY be calling listing agents for the properties you want to see. The thought behind this I suppose is “I can get a better deal if I don’t involve another agent and contact the listing agent directly.”

While the listing agent loves you only calling them, here is why is is usually a costly mistake for home buyers.

Myth # 1- I will get a better deal if I call the listing agent directly.

That listing agent is contractually bound to do what is in the best interest of the seller, and that means getting the highest dollar amount for the sale of the home. NEVER disclose your top dollar or financial ability to get a bigger mortgage loan to them because by law they have to go back to the seller with this information.

Remember…your goal is to pay as little as possible, while the seller’s agent’s goal is to get as much as possible for the seller. No matter what a Real Estate agent claims, this is a clear conflict of interest.

Myth # 2- I can find more homes for sale by calling more than one agent, or looking at multiple web sites.

The days of each real estate office having big books of only their companies listing are long gone. It is mutually beneficial for all Real Estate Agents to have all properties in the same database (call the MLS – or Multiple Listing Service)

All Real Estate Agents in the same area therefore pull the same list of homes available  for sale from the same multiple listing service database. Local agent sites typically interface with the local MLS site a minimum of once per day. If a new house for sale gets added today, EVERYONE local should have it listed tomorrow.

If you saw a home on Zillow, or some other national site, but that particular home didn’t come up in the local agent’s site, remember sites like Zillow & Trulia are NOT updated as often as the local MLS database real estate agents can pull from are. If it is not on the local MLS…  chances are the house that you saw has already been sold or is already under contract.

More importantly, the opposite is more often true. You find a home on a local real estate web site but NOT on the national sites. This is because some local companies do NOT report to the national systems. In my area (Minneapolis / St Paul, MN), the biggest player in the market (Edina Realty) recently stated they will no longer let their listing be show on the big national sites.  This means if you are looking at home for sale here, but on a national site versus a local site, you a NOT seeing over 20% of this areas listing!

The bottom line is the smart move for home buyers, and especially first time home buyers in MN and WI, is to use the services of a good, licensed local real estate agent in any home purchase transaction, and save yourself a lot of time by only looking at one LOCAL REALTOR web site.

Katie Draz, Realtor

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Looking for a good Real Estate Agent in Woodbury MN area?  I suggest Katie Draz.


Can you qualify for a mortgage with bad credit?

Can you qualify for a home mortgage loan with bad credit?

FACT: The mortgage and credit crisis which exploded onto the scene in 2007 has eliminated bad credit and bruised credit mortgage loans. Lenders simply don’t offer bad credit sub-prime home loans anymore.

What’s Your Credit Score?
Every lending facility uses guidelines to determine your credit worthiness. Upon reviewing your application, you’re given a credit grade and a determination regarding your loan’s approval or denial. Lenders DO NOT give loans to those with bruised credit anymore. If you are denied by a one lender, contacting 10 more probably won’t help. Click here for some general criteria used within the lending industry to determine credit.

What credit score do I need for a home loan?
Generally speaking, in today’s mortgage world, if your middle credit score is below 640, it is very unlikely that you will qualify for home loan financing no matter what anyone tells you or you see elsewhere on the internet. With a score below this level, you really should save yourself the hassle. Stop attempting to find mortgage loans, and work on improving your scores instead.

Review your credit score?
If you are not sure what your credit score is, you should officially find out. Apply for the mortgage loan, and let the mortgage lender review your exact situation. DON’T ASSUME YOU CAN’T QUALIFY!

CREDIT PROBLEMS & ANSWERS

Late Payments
If your credit has multiple RECENT 30, 60, or 90 plus day late payments, you probably won’t qualify. Especially if those late payments occurred LESS THAN than two years ago. Lenders want a clean recent payment history. Check HERE for some general criteria used within the lending industry when you have late payments.

Credit score graphCollections, Judgements, Tax Liens
If your credit history indicates unpaid collection accounts, most “A” grade loan lenders will require these amounts to be paid off before the loan is funded. FHA typically will ignore them if they are under $500, and more than 2 years old. Medical collection “usually” are ignored. Judgments’ (you got taken to court & lost), are almost always REQUIRED to be paid off before approval.

Bankruptcy & Foreclosures

  • If your bankruptcy is more than two year old, you can usually be approved for an FHA loan with as little as 3.5% down.
  • If your foreclosure was recorded is OVER least three old, you may qualify for an FHA loan with as little as 3.5% down payment.
  • If your bankruptcy is older that 4 years, and you have good re-established credit, you may now qualify for an standard conforming loan.
  • High Debt Ratios
    If your income-to-debt ratios are too high, you can either reduce your personal debt (i.e., pay down your debt), obtain a debt consolidation loan, pay down your debt with funds from the sale of personal assets (boat, camper, etc.), select a lower interest rate ARM loan, or add a co-mortgagor. 

    Is a debt consolidation loan for you?
    If you have any late payments on your record, part of the reason may be because of high credit card debt. If you qualify, you can pay off all of your high-interest credit cards into a low debt reduction refinance loan which may be tax deductible (unlike credit cards, which are NOT tax deductible).

     


    What is your home worth? Find out for free

    What is your home worth today? Wish you could get a free appraisal?

    Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, it is important to have an accurate idea of what your home is worth.

    There are many sites that claim to give you are idea, including Zillow, Trulia, and more. It is also a well known fact those sites have very questionable data, giving values that range from close, to crazy far off. The big problem is, where is the data they use coming from and how accurate is it?

    There is a better free tool to answer the estimated appraised value of your home question. This system uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

    While the estimate may not be the actual or appraised value of your property, it can be a much more accurate than Zillow to gauge fluctuations and trends in your market which affect your home’s value.

    CLICK HERE FOR A FREE HOME VALUE ESTIMATE (MN and WI properties only)

     

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    HARP 2 not ready until March 15th – Why?

    HARP 2 – Not ready until March 15th, 2012
    Minneapolis, MN: There is a lot of consumers interested in a HARP refinance in MN and WI. The Home Affordable Refinance program allows home owners who have lost value to still refinance their homes are today’s low HARP  refinance rates.  HARP has been available since mid 2009.  HARP 2, which was announced in November 2011 removes some restrictions, and should help many more home owners refinance their home loans.

    Officially, the the HARP 2 program started December 1. Unofficially, most lenders won’t be offering it until after March 15th, 2012. Let’s explore and understand why?

    The original HARP program, which allows a home owner to be underwater on their home mortgage loan up to 125% loan-to-value is available today.

    THE BIGGEST DELAY: Simple. Software. When a lender “underwrites” a loan, they actually do so through an AUS, which stands for Automated Underwriting Systems. The computer software evaluates the application, and gives an answer. The underwriter then verifies the computers decision. For example, the software may give a YES answer, then ask for pay stubs to verify income. The underwriters job is to then review the pay stubs to make sure the submitted income is the actual income.

    Both Fannie Mae and Freddie Mac need to reprogram their computers, and they’ve indicated this will become effective March 15th.

    BENEFITS TO LENDERS OF AUS: Can a lender “manually” underwrite a file?  Sure, but the biggest benefit of submitting a file through the automated systems is all about liability. Contracts with Fannie Mae and Freddie Mac protect a lender against liability for underwriting mistakes made by the lender of the original mortgage if the software said YES. Therefore smart lenders are not likely to take on the additional risk of a manual underwritten file.

    THE RULES: Another major issue is simply getting the rules written, and distributed up and down all the lender channels. While Fannie Mae and Freddie Mac have indicated what their rules are, remember that they don’t actually lender to consumers. Lenders lend. Fannie Mae and Freddie Mac simply buy loans from lenders. Therefore there is still a large amount of risk to lenders. Each individual lender needs to review new rules, consider the risk, decide if they even want to participate in the enhanced HARP 2 program, then write their rules and push them out to the Loan Officers on the street.

    THE BOTTOM LINE: Look for most lenders to start pushing out HARP 2 Refinance rules about the middle of February 2012, but not actually doing them until after March 15th, 2012.  Furthermore, expect a huge rush of customer looking to take advantage of the program, creating massive delays with the banks.


    Mortgage Interest Rates about to go up due to new HIDDEN tax

    All home mortgage interest rates are about to go up due to new hidden tax congress buried into all new mortgage loans.

    As part of the deal to extend a temporary reduction in payroll taxes, Congress last month approved a permanent increase in the fees borrowers pay on mortgages backed by Fannie Mae, Freddie Mac and the FHA.
    The increase is an annual charge of at least 10 basis points – equal to one-tenth of one percent of the loan amount. That’s equal to an additional $300 a year on a $300,000 mortgage, or an additional $25 a month. The increase is proportional, so a borrower with a $150,000 mortgage would pay another $150 a year, one with a $400,000 loan would pay an additional $400, etc.        LOCK NOW

    Watch the video from Frank and Brian to learn more, and be sure to COMPLAIN to Washington. Of course this is also a great time to mention the importance of who you select to be President…  DO YOUR HOMEWORK!

    Thanks Washington…  Nice move


    LendingTree Settles lawsuit over misrepresentations to consumers

    Minneapolis, MN: Out-state online lender LendingTree must pay penalties to Charleston and Berkeley counties of South Carolina as part of a $3 million statewide settlement over misrepresenting “When banks compete, you win”.

    Ninth Circuit Solicitor Scarlett Wilson announced Wednesday the settlement with LendingTree. In 2008, Solicitor Wilson and other solicitors from across the state sued LendingTree for failing to make the required disclosures for mortgage brokers who do business in South Carolina.

    “LendingTree misrepresented to consumers their mortgage applications would be competitively shopped for the best rates,” said Solicitor Scarlett Wilson. “This led consumers to believe that LendingTree was working for them and not against them. Whether prosecuting criminals or bad corporate citizens, I’m going to use every option available to help protect the citizens of Charleston and Berkeley counties.”

    As part of the settlement, Charlotte-based LendingTree will pay more than $400,000.00 in statutory penalties to both Charleston ($284,447) and Berkeley ($121,904) counties as part of a more than $3 million statewide agreement.

    The South Carolina General Assembly passed laws protecting consumers that required mandatory disclosures from mortgage brokers. These laws require mortgage brokers to work for the borrower. At the time, LendingTree was using the slogan in their commercials “When banks compete, you win.‟

    “Despite this settlement of the statutory fines, the actual borrowers, who are not known to us, may be able to pursue their own claims for damages against Lending Tree.” said Solicitor.

    Contrary to what many home owner think, you really can NOT get anything better from some out-state online mortgage company than you can from your local Minnesota based mortgage lender.

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    How people find a Real Estate Agent

    The two most important people in a real estate transaction is your Loan Officer, and your Real Estate Agent.

    Having an experienced person in these two positions will make for smooth, rewarding, successful transaction. So how do people pick this very important person?

    Referral by friend, neighbor or relative is the most commonly cited method sellers used to find their real estate agent.

    Thirty-nine percent (30%) of sellers used a referral to find their agent, and an additional twenty-two percent (22%) used an agent they had worked with before.

    The typical seller only contacts one agent during the selling process, further emphasizing the importance of personal relationships in real estate.

    Sixteen percent (16%) of sellers contacted two agents before selling their home and eighteen percent (18%) contacted three or more agents.

    Among recent sellers who used an agent, eighty-five percent (85%) reported they would definitely (69%), or probably (16%) use that real estate agent again or recommend to others.

    For buyers, the average person talks to 9 agents over the typical 9 month long period from the time they start thinking about buying a home until they actually close on a home.


    Mortgage Interest Rate Prediction for 2012

    ST PAUL, MN: As the new year begins, there are no shortage of so called “experts” telling us what to expect for mortgage interest rates in 2012.  Mortgage interest rates closed out 2011 at some of the the lowest rates of all time. Some expect those interest rate trends to continue through the first quarter and beyond. Others expect a rapid increase in mortgage rates.

    Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered views. It’s tough to know who to believe.

    For example, here are some predictions for 2012 :

    • Home prices will rise in 2012 (Freddie Mac)
    • Home prices will fall in 2012 (CBS News)
    • Mortgage rates will rise in 2012 (American Banker)
    • Mortgage rates will fall in 2012 (LA Times)

    The issue for buyers, seller, and those wishing to refinance their existing mortgage loans in Minnesota and nationwide is that for many people, it can be a challenge to separate a prediction from fact.

    When an argument is made on the pages of a respected newspaper or website, or is presented on some financial cable show by a well-dressed, well-spoken talking head, we’re inclined to believe what we read and hear. This is human nature. However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else — are based on a combination of past events and personal opinion.

    Remember, predictions are simply guesses about what might come next, nothing more.

    I am constantly amazed to hear politians, reporters, and other “so called experts” who have never written a mortgage loan ever in their life tell me how things work in the mortgage business. More annoying yet, is that are a lot these are the same people who makes the laws!

    DON’T HOLD OFF buying a new home or refinancing your existing home because some “expert” says interest rates may drop sometime in the future. Mortgage interest rates are CURRENTLY at all time historic lows. Forget the experts! Jump in today, take the deal, and smile!

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