New 3% down payment option for home buyers

Minneapolis, MN: We all know one of the biggest obstacles to buying a home is the lack of down payment.  Many first time home buyers have the credit, and income to handle their own home, but just can get over that down payment hurdle.

FHA Home Loans have always been a popular first-time home buyer choice, because the program only requires a 3.50% down payment.

3% down payment home ready, homepossible, homeone loan

Both Fannie Mae (HomeReady) and Freddie Mac (HomePossible) have just 3% down conventional programs. These existing programs have both income guidelines based on the properties location. You must also be a first time home buyer, which is defined as someone who has NOT owned a property in the past three-years.

Both HomeReady and HomePossible require the buyer to take first time home buyer education classes, and for doing so, you get a slightly better interest rate, and slightly cheaper monthly mortgage insurance rates. If you meet the qualifications for these programs, they are both pretty awesome deals.

But if your income is too high, or if you’ve owned a home in the last three years, you still have a low 3% down payment program offered by Fannie Mae, that has been around for a few years.

Freddie Mac has just announced their version of the 3% down payment program for everyone, which they are calling HomeOne. The program starts July 29, 2018.

Very similar to Fannie Mae’s program, the new Freddie Mac program does NOT have any income or geographic restrictions, and it is not restricted to first time home buyers. The program is only available for single family (one unit) properties.

Home ready, Home Possible, Home One loan applicationAs with all home loan programs, the new HomeOne mortgage down payment requirement is just one of many aspects used to determine loan approval, including credit scores, debt ratios, property, and overall ability to safely afford the home payment.

 

We lend on these programs in Minnesota, Wisconsin, and South Dakota. Just complete the quick and secure online application to determine if HomeReady, HomePossible, and now HomeOne is right for you!.

 

 


How to get the best interest rates or closing costs

How to get the best interest rates or closing costs probably isn’t what you think.
Minneapolis, MN: Buying or refinancing a home? What mortgage company should you work with? What lender offers the best interest rate? Sadly, so much of what you see out there is simple advertising smoke and mirrors designed to capture your attention. 
For example, did you realize you can pretty much pick any interest rate or closing costs you want on your mortgage loan?

HOW THE BEST INTEREST RATES WORK

Want a super low interest rate? No problem.  best interest rates

In many cases, you have the option to pay more money upfront in exchange for a lower rate.  Some refer to this as “paying points,” buts that’s a bit of an archaic term.  Self-annointed gurus used to say “never pay points!” But that’s not necessarily good advice.  Discount (or “discount points”) offers a perfectly legitimate and objective choice to pay more money upfront in exchange for a lower interest rate.   Whether or not the trade-off makes sense to you is fairly subjective.  

In the more intelligent conversations, discount is discussed in terms of “breaking even” or “break even months.”  In other words, if I pay extra cash today, how long will it take for me to break even due to lower monthly payments.  Closer to 10 years?  That doesn’t make sense for most people.  5 year or less, however, and it can start to make better sense.  

All this to say that the discount points required to move down to 1/8% are fairly low for most lenders at the moment.  For instance, paying an extra .5% of the loan amount could get you another eighth of a point lower interest rate, and it would take just over 4 years to break even on that extra expense.  Of course, if you plan to sell or refinance in 3-5 years, this makes no sense. If this is the last house and mortgage you want for the foreseeable future, it’s something to consider.  

Lowest closing costs

HOW THE LOWEST CLOSING COSTS WORK

A similar conversation can be had for paying less in closing costs up-front today. You can choose to pay lower closing costs today, but understand this is simply achieved by the lender raising the interest rate you would get.  Small reduction in costs equal small rate increases, while large reduction in closing costs equal large interest rate increases.

This trade off is know as ‘Lender Credits’

So again, what is the math, and does it make sense? A common lower closing cost quote is a “No Loan Origination” quote. On most fixed-rate loans, you can eliminate loan origination costs, which is 1% of the loan amount by roughly increasing the interest rate 1/4%.

On a $200,000 loan, eliminating loan origination would save you $2,000 today, but a 1/4% higher interest rate will cost you $29 more per month on that $200,000 loan. Simple math gives you a 69 month break even period. If you are in the loan less than 69 months, you win.  Each month after 69, you pay an additional $29.

What is the math calculation on your loan amount?

But wait, even this is too simple. Do you have the money today? Do you want to keep some of that money in your pocket today to use for something else? So again,  Whether or not the trade-off makes sense to you is fairly subjective. 

Lower closing costs in exchange for higher interest rates is also a perfectly legitimate tool for home owners.

THE BOTTOM LINE

Don’t fall for advertising gimmicks. Rates way lower than everyone else, you are buying discount points, but may not know it. Anyone offering ‘no lender fees’, rebates, or any other sort of reduced closing costs are simply increasing the interest rate to pay for it.

The bottom line is simply this. A good conversation with a licensed, experienced, professional Loan Officer over your long-term, short-term, payment and equity objectives, is the only way to determine what is best interest rate for you and your situation.


First Time Home Buyer Class in MN

MN First Time Home Buyer Classes

Minneapolis / St Paul, MN: Buying your first home can be a fun exciting time. It can also be stressful, especially as there is a lot of misinformation spread from well intended friends, family, and even Real Estate Agents.

When it comes to first time home buyers, they are usually told about special programs for first time buyers, and classes you need to take. The first thing to understand, is most mortgage programs DO NOT REQUIRE a home buyer education class, UNLESS you are getting down payment assistance.

Most people don’t want to take a class unless necessary. Therefore we generally suggest you complete a full Loan Application for review to determine if you need a class. There are never any obligations to review your situation.

Free good faith estimate

The second major thing to know is that IF you DO need to take a class, you need to take the correct class. Almost ALL classes put on by a Real Estate Agent, Bank, Credit Union, or Mortgage Company are really only marketing gimmicks designed to get you introduced to those people, so you hopefully use them as your Real Estate Agent or Loan Officer. These classes DO NOT COUNT and should be avoided.

Here in Minnesota, like most other states, to obtain down payment assistance as a first time home buyer, you ARE REQUIRED to attend a Minnesota state approved 8 hour home buyer education class. This class is mandatory for programs like the Minnesota Housing Finance Agency (MHFA) Start Up loans, Dakota County First Time Home Buyer, City Living, and many other programs where you get assistance.  The class is also required to get reduced monthly mortgage insurance with the HomeReady conventional 3% down payment program

This class can be taken online, or in person at multiple locations across the state. There are different costs for each class ranging from as low as $25 to $75 per household. Only 1 borrower is required to attend.

Minnesota Only

The official required class is a NO PRESSURE, NO OBLIGATION class. No software, books, or anything else to buy. They will teach you about making good decisions in your future home buying experiences, and provide great information about the qualifying process, improving your credit score, and much more. There is no better way to learn about being a First Time Home Buyer in Minnesota than to attend AN APPROVED home buyer education class.

Upon completion of the class, you will received the required completion certificate that you need to give to your Loan Officer.


The DANGER of automated mortgage pre-approvals via your cell phone

The danger of automated mortgage pre-approvals via your cell phone

Minneapolis / St Paul, MN: Can you really get a mortgage pre-approval online in 10 minutes? Yes. Should you? Probably not. It’s 2018 as I write this, advancements to our lives, along with instant gratification is everywhere. Why go to the store when you get better selection and two day shipping from Amazon. No need for old fashion video stores, everything is on Netflix, Amazon Prime video, or your HBO Go app.  Twitter, Facebook, the internet, and of course Smartphones and iPads have replaced home computers for many people.

So it is no surprise that many mortgage lenders are now advertising instant 10-minute mortgage loan pre-approvals while you stand in front of the house you just looked at. The biggest company pushing these is Quicken Loans ® “Rocket Mortgage”®.

Sounds cool, and their commercials are really funny… But wait a minute… This is the largest financial transaction of your adult life. Can it really be done on your cell phone?

 The Traditional Mortgage Loan Process

The traditional process is you complete a loan application. You do that in person, over the phone, or by completing an online loan application. From there, a real live person reviews the information, pulls your credit report, talks to you about your situation, uses knowledge and expertise to explore all avenues, issues, and different loan options (all good ideas).

Assuming that all looks fine, your application is processed through one of the major AUS (automated underwriting system) of Fannie Mae, Freddie Mac, FHA, etc, to get your initial “looks good” answer.

ffThis automated underwriting system process only takes a few seconds, and with the initial “looks good” answer to your loan application, you got a loan, right? NO, not even close.  This is just AN INITIAL step.

Next, just because the AUS indicates ACCEPT (yes), there are still pages of information and requested items that need to be received and reviewed for accuracy BY ALL LENDERS. Common items are W2’s, pay stubs, bank statements, tax returns. Depending on your situation, you may need further items, like bankruptcy papers, divorce decrees, and more.

You generally need to gather all those documents and submit them to your lender for review to receive a proper Pre-Approval.

PRE-APPROVAL IS NOT A LOAN GUARANTEE

After you find the exact house and sign a purchase agreement, the lender orders the appraisal, title review, and everything else is sent to the underwriter for final review. Generally speaking, a proper professional pre-approval will equal a successful final approval by underwriting in the final stage of the process. A sloppy pre-approval, not properly review??? Scary stuff.

Your largest financial transaction of your life is too important to trust to just anyone, let alone a computer. You need the wisdom and input from a licensed, experienced, and professional Loan Officer.

The Quicken Rocket Mortgage ® 

The difference with their app, is that after taking the initial application information online (like thousands of other lenders), their app jumps right to running your information through the major automated underwriting system to get that initial pre-approval. Yes, that can take just 10 minutes.

Next, they attempt to gather some of your basic supporting documents electronically. Rocket Mortgage ® will ask you to link your financial accounts to their program. This allows them to check your financial statements online without you having to send them the physical copies of your banking information. Again, sounds cool, but in the day of cyber hacking, do you really want to give them access to your information electronically?

Next, a huge portion of applicants are not able to take advantage of instant document verification, and still need to submit many, if not all of their documents the traditional way – completely eliminating the cool factor.

You can also get instant rate quotes, cost quotes, and options like to buy discount points. Again, sound nifty, but…

The first major issue is simple. Garbage in equals garbage out.

I review a LOT of online mortgage applications.  Rare is it that I don’t need to change or adjust any application data before running it though the computers. Data errors, missing data, and income that isn’t allowed to be used for qualifying are all too common.

For example, I recently had a client input $50,000 a year for his wife at a job she has been at for about 9 months. But, as I interviewed him, I discovered that her new job is 100% commission based. Standard underwriting rules for commission based income require the person to have two-years on the job, and that we average the two-years of income.  Therefore her job qualifying income was ZERO.  Oops… Now you are running around with a quick pre-approval looking at houses you will never actually get final approval to buy.

Another recent applicant answer the “Do you pay alimony or child support” question online NO. But when I physically reviewed his pay stub, it clearly showed the deduction for child support. This additional debt lowered the maximum house he could buy $50,000. Again, potentially someone running around with an invalid pre-approval letter.

 The Big Disadvantage of Instant Online Approvals

For as cool as all this sounds, it has huge disadvantages.

First is not having the opportunity to talk to a human loan officer. Consumers may lose out by applying for a mortgage that isn’t necessarily the best choice for their situation. I get clients all the time who complete my online application for one loan type, but I end up switching them to something better suited for their situation. This is because most applicants usually have several mortgage options available to them. Since most consumers are not mortgage experts, this is clearly an area where a human loan officer could help steer their client in the right direction.

Your largest financial transaction of your life is too important to trust to just anyone, let alone a computer. You need the wisdom and input from a licensed, experienced, and professional Loan Officer.

They typically don’t offer first time home buyer programs, and don’t offer down payment assistance programs. This is especially troublesome, as younger first time home buyers are the ones more inclined to think apply on your phone is cool.

Do they have the best interest rates and lowest closing costs?  Generally not, and sometimes, especially on government loans, like FHA, we beat their rates by a long shot.

The Best Move When Getting Mortgage Pre-Approved?

When buying a home, your best move is to always work with a local lender the traditional way. The guy located in your geographic area, with a local reputation to protect. There is nothing anyone on the internet on the other side of the country can offer that you can’t get down the street.  More often than not, it is just the opposite… Especially when it comes to down payment assistance programs for first time buyers. These programs are always only available from the local lender.

We lend for homes in MN, WI, and SD and would love to assist you

Click to apply online


Tips for MN First Time Home Buyers

Minnesota First-Time Home Buyer Tips

Minneapolis, MN: Being a first time home buyer, and buying your first home is an exciting time. There is no reason to be worried, and here are a few tips to help guide the way.

STEP 1:

Find a lender – Get Pre Approved for a Mortgage Loan.

Unless you are paying cash, you are going to need a loan. Finding and choosing the best loan and lender to handle the loan for you should not be taken lightly. Randomly taking to whoever answers the phone at  1-800 Big Bank, or thinking you can get a mortgage in 10 minutes via your cell phone are generally huge mistakes.

Read my whole separate article on Shopping For a Lender

Once you find your Loan Officer, they will review various programs with you, go over your maximum purchase price, payment comfort level, and any other requirements.  Expect to send in a minimum of your Photo ID, last 30-days of paystubs, last two-months bank statements, last two-years W2’s, and at least your last filed Federal tax return.

With a mortgage pre-approval in hand, you can meet with the Real Estate Agent, and know exactly how much house you can afford to buy, so you are not wasting time looking at homes outside of your price range.

Step 2:

Find a Realtor.

As with picking a Loan Officer, picking a Real Estate Agent also should not be taken lightly. As a Loan Officer, my tips for selecting an agent are:

  1. Avoid big real estate ‘teams’ – you never work with the big guy.
  2. Most major real estate company charge extra fees – Pick small independents
  3. Experience matters, A LOT.

Once you’ve selected your agent, they assist you in finding your dream house, negotiating a great offer, walking you through the paperwork, and helping with things like inspections.

TIP:  Did you know that the buyers do not pay anything out-of-pocket for the working with an agent to buy a home. The cost of your agent is paid for by the seller.

 

Make a Home Wants and Needs Wish List.

Make a list of what you absolutely must have in your new home. Number of bedrooms, school district, etc., and let your Real Estate Agent know.  Then also decide on things you can be flexible on. Unless you are building a custom home, no house will be a perfect fit.

Looking At Homes.

Typically your agent will set you up on automated email listing of new homes that fit your criteria.  Especially in the under $300,000 price point, you should look at those emails daily, and if you see something you like, you need to be prepared to drop everything, and go immediately look at the house.  Waiting for the weekend or a day off, and you may have been just beaten out by someone else.

As you look at homes, you may find your wants/needs list can change.  Be sure to pass that along to your agent.

Ready to get started?

It’s easy. Simply complete the Online application.  You’ll be applying directly with me, Joe Metzler, an experienced, multiple award winning Loan officer with over 20-years in the the business. We lend in MN, WI, and SD. Learn more about me HERE.

 


Buy a MN or WI Home with $1,000 Down and Down Payment Assistance

Buy a MN or WI home with as little as $1,000 down? Yes, it is possible.

Minneapolis, MN:  One of the biggest true hurdles to home ownership is a lack of down payment money. Sadly, many people don’t even apply for a home loan, because they think you need a much bigger down payment than you actually may.

You may qualify for down payment assistance. Apply to find out.
You may qualify for down payment assistance. Apply to find out.

But, if you have at least $1,000 of your own money, OK or better credit (640 score or higher), you may be able to buy your own home using our first time home buyer programs with down payment assistance.

Other low down payment options include:

  1. 3% down payment conventional loans (HomeReady and Home Possible)
  2. 3.50% down payment FHA loans
  3. No down payment VA loans
  4. No down payment USDA Rural development loans.

If you are in MN, WI, SD, or FL – Simply complete the secure online application at www.FirstTimeHomeBuyer-MN.com in about 10 minutes time. A fully licensed and experienced Loan Officer will review your loan application, then go over the various program to see what programs you qualify for, how much house you can buy, what the payments might look like, and finally, how much cash you may, or may not need to put it all together.

If you are in other states, simply find a LOCAL mortgage broker, and apply with them.

You have nothing to lose in applying, and everything to gain in owning your own home!

—————————————–

Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and Top 300 Loan Officers in the Nation for 2010, 2015, 2016.

To finance with a home with Joe and Mortgages Unlimited, your local preferred lender for Minnesota, Wisconsin, and South Dakota, simply call (651) 552-3681 or APPLY ONLINE. NMLS 274132. Equal Housing Lender. Not everyone will qualify. See web site for more details. Not an offer to enter into an interest rate lock agreement.


How to deal with collections on your credit report

Minneapolis, MN: No one likes having dings on their credit report, but let’s face it, sometimes it is impossible to avoid. When credit dings happen, it is important to work on getting back into the credit good graces, as it effect so many things in your life, from ability to get a mortgage loan, the interest rate you pay on mortgage, credit cards,  car loans, and even you paying more for your car insurance.Collection accounts

Next to basic late payments, small collection accounts are some of the most common negative item we see on credit reports. We see a lot for medical items, and old utility bills.  We see a lot over disputes with a company that never got resolved.

While some of theses collection accounts may be small, and even long forgotten, they can be real credit score killers.

The main things you need to know about collection accounts

First, is that simply paying them off doesn’t mean they go away. It still happened, and it is still on your credit report.  You can always try to leverage paying the creditor contingent on having the creditor completely remove the item from your report, and sometimes this works. I suggest everyone at least try it. But there is nothing mandating a company remove the negative item once paid.

Paying them off also doesn’t magically improve your credit score like people think. You should usually see at least a small improvement to your credit score, especially if the account being paid is a more recent collection account.

If the collection sits on your credit report for a really long time, and you now pay it off, you may temporarily LOWER your credit score because you may have turned the DLA, or Date of Last Activity to a current date.  The basic premise being that the older a negative item is, the less it hurts your score. By paying it off, the account for example went from 5-year old unpaid account (which still hurts), to a one month old paid collection, which may hurt more because it is now recent activity.

Most credit repair experts will tell you to pay off collections starting at the newest account, and working back to the oldest, and that sometimes, it is best to just leave an old account alone.

Over time, it is ALWAYS better to pay a collection account. An unpaid collection account hurts credit more and longer than a paid collection account.

Credit score factors

Finally, while some unpaid bill becoming collection may be inevitable, most collections are avoidable. Dealing with the situation up-front is best so it never becomes a collection account. I understand the frustration of a medical bill that should have been paid by insurance, and fighting with the hospital or clinic. But ignoring it doesn’t make it go away, and it will probably come back to haunt you years later.


Top 150 Workplaces 2017 – Mortgages Unlimited, Inc

MINNEAPOLIS, June 26, 2017. — Mortgages Unlimited, Inc, a mortgage company based in Maple Grove, MN, has been named one of the Top 150 Workplaces in Minnesota by the Star Tribune.

A complete list of those selected is available at StarTribune.com/topworkplaces2017 and was also published in the Star Tribune Top Workplaces special section on Sunday, June 25.

Mortgages Unlimited was ranked 14th on the small company list, out of a total of seventy companies, and also made the list in 2016, ranking 5th on the small company list.

Top 150 Workplace 2017 - Star Tribune - Mortgages Unlimited

As a private, locally owned mortgage company serving Minnesota, Wisconsin, and South Dakota, Mortgages Unlimited is amongst the region’s most trusted Mortgage Companies receiving multiple company and customer satisfaction awards over the years, along with having multiple award winning Loan Officers.

Mortgages Unlimited is also among the region’s most experienced mortgage lenders closing over $5 billion in residential mortgages transactions for our over 50,000+ satisfied customers since our inception in 1991.

Top Workplaces recognizes the most progressive companies in Minnesota based on employee opinions measuring engagement, organizational health and satisfaction. The analysis included responses from over 69,000 employees at Minnesota public, private and nonprofit organizations.

Mortgages Unlimited

Mortgages Unlimited has offices in Maple Grove, St Paul, Eagan, Woodbury, Stillwater, Elk River, Bloomington, Otsego, and Rice Lake, WI.  During 2017, Mortgages Unlimited will also offer home loans in Arizona, and Florida to serve the 2nd home market of our midwest clients.

To apply for a home loan with Mortgages Unlimited, call (651) 552-3681, or visit us online at www.MortgagesUnlimited.biz

 


How much credit card use can effect your credit score

How much credit card use can effect your credit score

Minneapolis, MN: Why does how much credit you’re using matter?  Simple, lenders look for signs of responsible credit usage, and the better you are at living within your means, the better it is for your credit score.
Many people think that simply never being late on your credit card is all you need to have a great credit score, but this is far from true. Everyone is viewed under what is know as the law of large numbers.  If most people in similar situations do similar things, you probably will too. If you constantly carry a balance, especially a high balance, you are considered high risk.  This because historically, those who carry high credit card balances tend to default at a higher rate. Therefore the assumption is you will too if you carry a high balances.
If you are using most of your credit, it may be difficult for you to get additional credit or other credit with a good interest rate.  Plan on getting a mortgage loan anytime soon? Mortgage interest rates on conventional loans can vary as much as 3/4 of a percent higher for someone with a 640 credit score versus someone with an 800 credit score.
Simply put, who tends to carry high credit card balances?  Those in good shape financially, of those maybe more living on the edge of their means?? Your credit score reflects the risk.
On the other hand, if you carry low or no balance, this generally means you are in good shape financially, and either don’t need to use the credit, or only a tiny bit of your available credit.

credit card usage
Credit Score Tips

As you can see in the graphic above, using less than 30% of your available credit is a good goal, but less than 10% is better. Keep in mind that never ever using credit can also have a negative effect, because they don’t know how to judge you.  Therefore using some available credit every once in awhile, and then paying it off quickly is generally a very good idea versus never using any credit cards at all.


Don’t lie on your mortgage application

Minneapolis, MN:  Home mortgage loans are one of the toughest loans you’ll ever apply for. The mortgage industry VERIFIES EVERYTHING. Credit, jobs, income, bank statements, tax returns, first born child, blood samples.  OK, maybe not the last two… But we check just about everything else.

I’ve been taking mortgage applications for over 20-years, and it appears many people treat it like a resume… and feel it is OK to pad information, or leave information out in order to improve their chances of getting approved.

False information on a mortgage application is a federal crime.

You may not think a little white lie, or omission is a big deal, but fraud is fraud, even on a mortgage application. Few, if any people actual read what they sign, but the application does contain the following notice:

The information provided in the application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misinformation of the information contained in the application may result in civil liability, including monetary damages, to any person who may suffer any loss due to the reliance upon any misrepresentations that I have made on the application, and/or criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Sec 1001, et seg.

Yikes.

Lenders check everything (twice).

The lending process is paperwork intensive.  We ask people to provide a lot of documents. While the vast majority of people are honest, you may be shocked at the number of forged documents we see.  Prior to the real estate market crash, it was much easier for deceptive people to fool lenders with phony documents, as many of the items people provided were taken for face value, and no additional verification were done.

A common example would be an altered W2 statement, where someone scanned in to the computer, and used PhotoShop or other similar software to change a 3 to an 8, and shows $80,000 a year income instead of $30,000 a year income.  That might have worked in 2006, but it doesn’t work today.

The electronic world we live in, and the tools available, simply will not let you get away with any of that anymore. Written verification of income with your employer, verification of W2’s and tax returns with the IRS. Verification of bank statements with your bank, fraud checks, and better credit reporting all work together to make it virtually impossible to commit this type of fraud.

I recently had a client who had a foreclosure that for some odd reason was not showing on the credit report. So they assumed we would never find out, and didn’t mention it. They also ‘lied’ on the application, as there is a question about having foreclosures. We found out, meaning all they did is was waste my time, the real Estate Agents time, the sellers time, processors, underwriters, and even their own money paying for inspections and appraisals on a house they could never buy.

Don’t fool yourself

You may be able to fool your Loan Officer up front, and get a pre-approval. This is because the initial pre-approval process generally does not encompass all the verification and fraud checks.  Because these items cost money, lenders don’t usually do these additional checks until a home has been picked out, a purchase agreement signed, and the full file goes into actual underwriting.

Home Mortgage Loans in WI, MN, SDNothing worse than to have found the perfect home, given notice to your landlord, packed all your belongings, only to find out the misinformation or omission has been discovered, resulting in a loan denial.

For Real Estate Agents, this is a common reason why a loan may die late in the process.  Because of privacy rules, I generally only say a discrepancy of information has been discovered is the reason for loan denial.

Tell your Loan Officer everything

It may be tempting to fudge the details slightly, or even try straight up fraud. My best advice is to always complete a mortgage loan application with 100% accurate and truthful information, and to always tell your Loan Officer everything. It will be discovered anyway.


How higher mortgage rates effect you

Minneapolis, MN: Face it, The super low mortgage interest rates are gone. Higher mortgage rates are here already, and it is very unlikely we will see them go back down anytime soon. Rather, it is anticipated that we should see 30-yr fixed rates into the mid 5% range by the middle of 2018.

mortgage interest rates up

HIGHER RATES = LESS BUYING POWER

As interest rates creep up, your buying power, or the maximum house price you can afford, goes down. As a ballpark quick way to think about it, every rate increase of 1% will lower the maximum house price by 10%.

A $225,000 loan at 3.75% is $1042 a month on a 30-yr fixed, while the same $225,000 loan at 4.50% is $1140, or $98.00 more per month. Another way of looking at it, is you would have to get a $206,000 loan to equal the same payment as the 3.75% rate on a $225,000 loan.

While neither of these should be deal killers for anyone looking to buy a home, it clearly has an effect on buying power, especially for First Time Home Buyers. So don’t delay, buy a home now while before anymore Fed rate hikes eat into your buying power.

For loans in MN, WI, and SD, contact us today to discuss home financing options, or just get started with a quick, no obligation online loan application.

—— Fine print —
Rates samples only. This is not an offer to enter into an agreement. Any such offer may only be made in accordance with the requirements of MN stat. Sec 47.206 (3) and (4). Mortgages Unlimited. 33 Wentworth Ave, St Paul, MN 55118. Equal Housing Lender. Not all customers will qualify. Information, rates, guidelines subject to change without prior notice. All loans subject to credit and property approval. Not all products available in all states or areas. Other restrictions and limitations apply. Licensed in MN, WI, and SD. NMLS ID #225504. 


Is Trump good for home loans?

Is President Trump good for home loans?

Minneapolis, MN: Its only been two weeks, but clearly the new Trump Administration is driving a different road from the past administration. Only time will tell what this all means for real estate and home mortgage loans, but here are a few observations, most relating to a reduction in regulations.

After the housing collapse, legislators and regulators came down hard on the mortgage industry under the false belief that if you could fog a mirror, you automatically got a loan.  While guidelines were looser, and third party verification of documents supplied by home buyer were lax, NO LENDER ‘knowingly‘ let the french fry guy at McDonald’s buy a million dollar home.

Were there a few bad players? Yes, But think of it more as it was easy to beat the system, as opposed to everyone in the mortgage world was a crook.

The Frank-Dodd financial reform laws, and the creation of the Consumer Financial Protection Bureau (CFPB) put the hammer down on many industries, not just mortgages. Of all the new regulations, only a few actually made a difference and make sense. The rest have cause home buyer costs to rise dramatically, added huge paperwork and delays to closing, and ultimately left many good people unable to buy homes because of unintended consequences.

It is expected that the Trump administration will go after many of the Frank-Dodd financial reform rules, and seek to reign in the CFPB, resulting in fewer rules, regulations, and paperwork. Meaning lower costs for home buyers, quicker closings, and less hassle to get a home mortgage loan.

A prime example is the CFPB designed a new ‘Loan Estimate‘, which replaced the ‘new’ Good Faith Estimate, which replaced the old Good Faith Estimate that existed since 1972. Today my clients are more confused than ever over the document and disclosures.

A second example is Loan Officers themselves. The rules put into place after the crash REQUIRE non-bank Loan Officers to go to school, pass difficult state and federal testing, and have mandatory continuing education. Sounds great, but Loan Officers at depository lenders (banks, credit unions, and lenders owned by banks or credit unions) DO NOT have to pass the same requirements of the S.A.F.E. Act. Don’t they all do the same thing? Why to bank Loan Officers not have to go to school, pass federal testing, or meet the same educational requirements?

Another example is that over the past 10-years, and especially the past 5-years, many lenders have pulled away from writing FHA loans. While not just for first time buyers, those are the people who primary use FHA loans. This was done because the Obama administration went after lenders from every angle under the False Claims Act for any minor error in FHA underwriting. Failing to cross even the most minor T, or dot the smallest I could have, and did,  leave lenders with huge multi-million dollar settlements paid to the government.

I’m all for slapping the hands of people doing blatantly wrong things. But lenders are not stupid. If the government is going to come after you for minor items, why bother.  It isn’t worth it. Those still offering FHA loans charge higher rates than needed to new buyers to offset anticipated government lawsuits. Someone has to pay those lawsuits, and it has simply been pass on to the consumer.

It is expected the Trump administration will have the CFPB and the Justice Department back off of their overzealous pursuit of lenders.

A smart balance of less unnecessary regulation, less paperwork, and a positive attitude towards business should be good for mortgage loans, the financial markets, home owners, and the country in general. It is way too early to tell, but lets all pray the county goes in a good direction.


FHA mortgage insurance lowered

FHA lowers monthly mortgage insurance

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UPDATE to this UPDATE:

The reduction in FHA mortgage Insurance has been (at least) temporarily paused before ever actually going into effect.

The FHA mortgage insurance rate reduction came as a giant unanticipated surprise to all of us in the mortgage world. I guess I should have figured something was up, as it appears the reduction was part of Washington’s political games.

The outgoing Obama administration people made the surprise reduction announcement with only days remaining in office. As soon as the Trump administration was sworn in, they immediately put the reduction on hold, stating it was irresponsible, and needed to be evaluated. This allowed the former administration to run around claiming how horrible the new administration was.  Errr….

Personally, I think it is a bunch of crap that these people play with home owners, the mortgage industry, and the real estate industry, regardless of what side of the political fence you stand.

—————- ORIGINAL ARTICLE ——–

Minneapolis, MN: HUD/FHA has announced that the required monthly FHA mortgage insurance costs are dropping with any new FHA loan closing January 27, 2017 and after.fha loans, fha update, fha mortgage insurance

For most FHA home buyers, this will mean a drop from .85% monthly, to just .60% monthly.

On a $200,000 loan, that means a monthly savings of $41.00 a month!

Combine the new lower FHA mortgage insurance, with the fact that FHA interest rates roughly 1/2% LOWER than conforming loans, and it is no wonder our FHA loans are so popular!

How to calculate FHA monthly mortgage insurance:

Take the loan amount times the insurance factor, then divide by 12
Example: Loan amount X .0060 / 12 = $ Monthly MI
$200,000 X .0060 / 12 = $100 a month

Visit my FHA LOAN ​page for more details, or dial 651-552-3681

FHA Loans, FHA Lender in MN, WI, SD

 


Why free credit report scores are not accurate

Why free credit report scores are not accurate

Minneapolis, MN:  As a mortgage loan officer, every single day, someone tells me their credit score they received from Credit Karma, some “free credit report” web site, their Discover Card statement, or even directly from the actual credit reporting agency.

Everyday, I tell them that is NOT their correct mortgage credit score.

We jokingly call those score your “Fake ‘O’ Score”  – (joke for FICO score)

Why isn’t my credit score my credit score?

It is actually rather simple. There are multiple credit score models, and the models vary by what you are doing.

Your Credit Score

When you apply for a credit card, the credit card company cares most about how you handle credit cards, and the likelihood of you defaulting on a credit card. Like wise, when you apply for a car loan, the scores are based on the likelihood of you defaulting on an auto loan. The same holds true for mortgages loans.

When you obtain your credit score from ANY SITE that YOU as the consumer are able to get your credit report, you are getting a GENERIC score.  That is, a score NOT based on any one industry risk factor.

It is very common for mortgage lenders to pull scores that are 20 points, even 30-points lower that you just saw on one of those other sites…. and NO, it isn’t because we pulled your credit!!  That truth about inquiries NOT lowering your score is for another article

 


Spring real estate has sprung

Spring brings renewed real estate activity to Minneapolis / St Paul

Spring 2016 has seen a welcome2_FTHB_1nice increase in real estate activity in the Twin Cities, MN area, with pending sales rising 12.6% compared to March 2015, and with the median sales price rising to $222,000, a nice 5.7% increase. Buyers signed 5,861 new purchase agreements.

Supply on the market remains a concern, area Realtor associations reported Thursday, with new listings rising only 0.5 percent, keeping supply levels at a 13-year low. Compared with last March, inventory levels fell 20.6 percent to 11,893 active properties.

Low inventory levels, at about a 10-year low is causing increased values, and multiple offers over asking price just days on the market for many homes for homes under $250,000.  As the home price goes up, it typically take longer for the homes to sell.

Mortgage lenders saw a large jump in mortgage loan pre-approval activity in February, which brings anecdotal evidence that there would be a surge of buyers this spring.


Home ownership IS cheaper than Renting

Owning is cheaper than renting

Minneapolis, MN:  The debate continues.  Is owning a home more affordable than renting.  New data is in showing that for most people, yes, owning appears to be cheaper than renting.

A survey by the big online company that starts with a Z and rhymes with Willow (I’m not a fan, so I don’t like to use their name) found on average, Americans spend about 15% of their income on a home mortgage loan, while renters that live in the nation’s largest cities spend around  30% of their income on just their rent.

Conventional wisdom says housing debt of 30% of your income or less is deemed affordable.

The report also looked at other issues effecting homeownership, and found that, just like in the past, coming up with down payment is a challenge for many, and that 13% of home buyers in 2014 got their down payment as a gift from relatives.

Many people are not aware that most home buyers DO NOT need a 20% down payment.  Conventional loan programs allow for as little as 3% down payment, and the popular FHA home loan only requires 3.5% down payment. If you are US Military, a VA loan is a no down payment loan. If you are looking to buy in rural areas of the country, the USDA Rural Development loan is also a no down payment loan.

Only if you live in a “high cost” are of the county where even the most modest home costs over $417,000 will you maybe need a larger down payment.

Many areas and potential home buyers also qualify for First Time Home Buyer programs, like the Minnesota Housing Finance Agency Start Up program, here in Minnesota where I am, that will typically loan the new homeowner a big chunk of their down payment money. The program here only requires the buyer to have $1,000 of their own money to buy a home.

Sadly, many renters THINK they can’t afford a home, when statistics tend to prove otherwise. Between small down payment requirements, gifts from relatives, down payment assistance programs, and even taking money from your 401k program for down payment, most people CAN make home ownership work.

Another challenge is debt.  Many talk about student loan debt killing home buying for millennials.  As a Loan Officer, I simply don’t see it.  What I DO see is first time home buyers needing to get back to reality in their home purchase. The term starter home needs to return to the lexicon of home buyers.

Your first home needs to fit into the reality of your income and debts. Therefore, your first home may not be your dream home.

Credit is the final challenge.  If you pay your bills on time, you should be just fine.  If you don’t, you need to get that corrected first. Realistically, you need to have a middle credit score of 620 or higher. If you have poor credit, you will need to work on improving your credit first. There are NO bad credit loans available.

 

ARE YOU READY TO BECOME A HOMEOWNER

All mortgage loan applicants need to meet some basic requirements:

– OK or better credit history.
– Stable employment
– Buy a home you can safely afford (known as debt ratios)
– Have some money in the bank

If you are realy, contact a local mortgage broker in your area.  Give them a complete mortgage application, and let them zero in on what programs you qualify for, how much house you can afford, what the payments will look like, and how much money you will need to pull it all together.

If it all looks good, you’ll be put in contact with a local expert Real Estate Agent, who will help you select that perfect home.