5 low down payment home loans

5 Low Down Payment Home Loans

Minneapolis, Minnesota:  Face it, for most people, the biggest obstacle to buying a home is a lack of down payment.  Here are 5 low down payment home loan options to help you get into your own home.

Zero Down Payment

  1. VA Loans: Available for U.S. Military personal, both current and former is a no down payment loan with no mortgage insurance. By far the most amazing home loan available.  Get VA Loan information
  2. USDA Rural Development Loans: Available for those wishing to buy in rural areas. This program is no down payment required. Income limits apply. Get USDA loan information.

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Low Down Payment

  1. Conventional 3% down. This low down payment loan for first time home buyers just recently came back into the market from Fannie Mae and Freddie Mac. Good credit or better required, and must take first time home buyer education classes. Get 3% down HomeReady loan information
  2. FHA Loans: This program only requires 3.50% down payment, and is probably the most popular loan. Very flexible underwriting guidelines compared to other programs for everything from weak credit, to higher debt-to-income ratios, and shorter waiting periods than other loans for past bankruptcy and foreclosure.  Get more FHA LOAN information
  3. Down payment assistance programs: Combine one of the standard loans with a down payment assistance program to ease your out-of-pocket expenses to get into a home. Most of these programs are loans that need to be paid back, require you to be a first time home buyer, and to take home buyer education classes. Program vary greatly by city, county, state, or community programs. Talk to a Loan Officer in your area for local program information.  Learn more about down payment assistance programs in MN.

 


Six Steps to a getting a home loan

Six Steps to a getting a home loan

Minneapolis / St Paul, MN: Buying a first home is one of the biggest, most exciting decisions you’ll ever make. Let Mortgages Unlimited guide you toward your future home.

Step 1: Manage your Money and Credit

images124Be realistic. Have some down payment money and your overall finances in order before applying for a home loan. Know your credit score too, as you need a minimum credit score of 620.

 Step 2: Apply for your loan

Contact our loan experts at (651) 552-3681, or click here to APPLY ONLINE. Your Loan Officer will look at your monthly income, credit history and debt level to qualify you for whatever loan that best fits your needs.

Step 3: Choose your Loan

FHA, VA, USDA, standard conventional, and down payment assistance loans are all available, and tailored to your individual needs, whether you are purchasing, refinancing, a first-time, or repeat buyer. Your Loan Officer will go over what programs you qualify for, how much house you can buy, and what payments will look like.

 Step 4: Home Buyer Education

Most first-time home buyers DO NOT need to take any classes, but if you are getting down payment assistance, you will. These classes teach the buying process, financing options, and being a responsible homeowner. Your Mortgages Unlimited Loan Officer will let you know if you need to take a first time home buyers class, and help you get scheduled for your class.

 Step 5: Shop for your Home

With a pre-approval letter in hand, sellers will take your offer seriously, as they know you’ve gone through the initial process of a lender reviewing an application and supporting documents, and said it “Looks Good” Finding out how much house you can afford narrows your search saving you time. After preapproval, you can work with a qualified real estate professional to find a home in your target neighborhood and price range.

Step 6: Become a Homeowner

Congratulations! You’ve gotten pre-approved, found a home, made a successful offer, and gotten through the final underwriting process. You are now officially a homeowner!

How To Apply for First Time Home Buyer Loans

It’s easy!  Simply fill out the online mortgage loan application, or call us at (651) 552-3681. We can take your application over the phone, or schedule an appointment at our St Paul, MN office.

 


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.


Buying a home is Cheaper than Renting

Owning is cheaper than renting, so why do so many people choose to rent?

Historically, and even today, buying a home is still cheaper than renting, but it appears that isn’t what many people believe, according to new data from mortgage giant Freddie Mac.

According to recent survey, a full 70% of renters currently feel that renting is more affordable than home ownership, and 55% have no plans to buy in the next three years. Those percentages are pretty close across all demographic groups, from young to old.images98735Many people choose to rent for lifestyle reasons, citing age, and freedom from home maintenance as large factors. Lifestyle considerations for buying or renting aside, affordability is obvious. According to Trulia’s last Rent vs. Buy report, buying remains cheaper than renting nationally. Buying is an average of 23% cheaper than renting. Buying shows to be cheaper in almost every market, which owning being the winning choice in 98 of the 100 largest U.S. metro areas, according to Trulia’s survey.

The survey shows most renters still have favorable views toward homeownership, and many still spire to own a home, but more than ever before, many choose to rent because they view it as more affordable and a better fit for their lifestyle right now.

Many renters, even those who indicated they plan to buy, believe they face hurdles in down payment, and carry too much debt. While this may be true for some, the myth is not based in reality. Maybe you can’t buy the dream house, but they can easily afford a starter house.

Starter Homes

Starter homes lost their luster, especially in the boom years of 2000 – 2006, when many first time home buyers jumped right into large new construction homes, probably above their realistic affordability range, when they probably should have followed their parents path of buying a starter home, and moving up to bigger nicer homes as age, family size, and income dictated.

As a Mortgage Loan Officer, I speak to people everyday with the champagne taste of a new home, but the beer budget.  This attitude of “I deserve” prevents many of them from buying, when historically, real estate ownership has created more wealth for the average person in this country than anything else.

Finally, the survey indicated almost half of all renters whose rents rose in the last two years say they like where they live, and will likely stay stay regardless of rent increases, low mortgage rates, and home affordability.

 


Minnesota has Highest Credit Scores

Minnesotans have nations highest credit scores.

According to a survey by credit agency Experian, the highest average credit scores for both sexes are found in Minnesota, where men score 703 and women score 710, out of a range of 300 to 850.  The numbers reveals Minneapolis is home to the men with the highest average scores, at 705 in the nation. Women in Green Bay, Wis., do even better, with an average score of 709.

Average scores nationwide for men is 670, and for women 675.  A full 1/4th of people fall in the 600 to 699 range, with the higher 600 scores being considered average, and the lower 600 scores being considered poor.

Nevada has the lowest men’s score average at just 645, while the lowest for women is Mississippi with a 640 average score.FICO scores

Many factors determine your credit score, with the biggest one being payment history. Learn more about what makes your credit score.  The score needed to get a mortgage loan, or getting a mortgage loan with a credit score below 640 is very difficult, and getting a loan with a score below 620 is virtually impossible, regardless of what you may read.


Tips for a Smooth Mortgage Application

Tips for a Smooth Mortgage Application

Shopping for a new home can be fun.  Looking at new homes, seeing different style homes, see how others decorate and starting to imagine what the home would look like when you moved it.

Getting a home mortgage loan – not so fun. But you can make it a much easier and smoother process if you start by working with a good Minnesota, Wisconsin, or South Dakota mortgage professional. Quickly followed by being realistic, cooperative and responsive to the paperwork requirements of the loan process.

First step, be realistic. Are you ready to buy a home?  Is your credit OK?  Do you have stable employment?  Do you have some money for down payment?  Assuming YES, the first step is to complete a loan application.

How to Pick A Lender / Loan Officer

Always use a local lender.  There is nothing better online than you can down the street. More often than not, it is actually the other way around. For example, no big internet lender can offers your “local” down payment assistance programs.

Always work with an experienced and fully licensed Loan Officer (read my previous article on learning how to tell the difference).

Mortgage Application Documents

images98725The mortgage application process is cumbersome and paperwork intensive.  Everyone needs to supply basic documents, but depending on your individual situation, you may need more – sometimes a lot more.

Gather and have your basic document ready as listed below. Please do not argue with your Loan Officer. When they call asking for something, it is not them picking on you, it is required. Arguing will get you no place except denied if you don’t supply what is being asked for

Checklist:

  • Photo ID
  • Two most recent pay stubs for each person signing the loan.
  • Last two months bank statements (real statements, not printout or screen shots, all pages)
  • Your most recent 401(k) or other retirement account statement.
  • W2’s (all jobs, last two years)
  • Most recently filed Federal Tax Return (all schedules) State return NOT needed

Common Additional Items

  • Documentation to verify additional income, such as child support, alimony or a pension (recent award letters, and divorce decrees)
  • Last TWO years business and personal federal tax returns if self-employed or own rental property
  • Full copy of bankruptcy papers, including the discharge notice
  • Old Foreclosure? – Need the Sheriff Certificate of Sale (available from the county)
  • Old Short-sale?  Copy of HUD1 Settlement Statement from the actual sale


Get pre-approved, not just pre-qualified

Everyone knows it is smart to get lender Pre-Approved before starting to look for a home, yet many people are actively looking at homes thinking they are Pre-Approved, when in reality, they are only Pre-Qualified.

Pre-Approved or Pre-Qualified? So what is the difference?

welcome2_FTHB_1As a Loan Officer for over 20-years, I can tell you story after story of people who thought they were Pre-Approved, signed a purchase agreement, gave notice on their apartment, only to be told a week before closing that they were denied.  The vast majority of these people, calling me to see if I can magically help them had two big items in common:

  1. They applied at a bank or credit union
  2. They NEVER supplied the lender with all (or even any) basic supporting documents up front.

Simply put, if you didn’t supply current pay stubs, bank statements, W2’s, and Tax returns, YOU ARE NOT PRE-APPROVED – No matter what they tell you!

Looking to buy a home in Minnesota, Wisconsin, or South Dakota? Don’t have your dream fall apart at the last minute, get properly Pre-Approved for a home loan today.

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1 Million Homeowners Regain Equity in 2015

An estimated one million homeowners regained significant equity in 2015.

house_moneyThis is according to a report from CoreLogic,  The report indicated the total number of mortgaged residential properties with equity at the end of 2015 was about 46.3 million, or a full 91.5% of all properties that also have a mortgage loan.

Nationally, borrower equity showed a year-over-year increase of $682 billion in the fourth quarter.

The same report indicated the number of upside down properties (negative equity) stood at 4.3 million, or about just 8.5% of all mortgaged properties – at the end of 2015, according to CoreLogic.

That’s a 19.1% decrease year over year, and great news for homeowners!

Of the estimated 50 million home with a mortgage, the survey found that about 9.5 million, or 18.9%, had less than 20% equity, and 1.2 million, or 2.3%, had less than 5%.

The number of homeowners with more than 20% equity is rising rapidly, according to CoreLogic. Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation and low mortgage interest rates are also factors.

Looking ahead in 2016, pretty much everyone is expecting home equity  levels to continue to build, which is a good thing for the long-term health of the U.S. economy.


How long does it take to close a loan

How long does it take to close a loan?

Getting a home mortgage loan in today’s world is a cumbersome paperwork intensive process.  Especially with all the recent regulatory changes added since the market crash.

images98725Not everyone realizes how long the process takes, but this is good information to understand when setting proper expectations for closing dates.

A large portion of mortgage lenders use the same software from Ellie Mae. Through this software, they are able to track the entire process, providing great industry insights.

According to the December 2014 Origination Insight Report from Ellie Mae, the average time to close a loan in 2015 took 49 days.

The average time to close a refinance dropped to 47 days, while the average time to close a purchase transaction increased to 50 days.

Obviously these are averages, so can some loans go through the process faster?  You bet.  Some slower?  Of course.

As a Loan Officer for 20+ years, by far the biggest delay I see in closings is cause by the client, by the client not providing requested documents to the lender in a timely fashion. By having standard documents ready to go up front, and responding to any document request from a lender in a timely fashion, the client can help achieve a smooth and successful on time closing.

Here are a few additional tips for a smooth home loan closing.


Avoiding TRID delays in your home loan closing

New government mandated lending rules, commonly known in the industry as TRID, have been reeking havoc across many home loan closings since they started in Oct 2015. The new rules essentially deal with mortgage lenders requirements to be accurate in their numbers and to provide accurate and timely disclosure to the client priot to the loan closing.

So how do homebuyers avoid last minute closing delays

TRID delays may be very real but, the bulk of the issues can be avoided by simply choosing the right Loan Officer.  If your you’re Loan Officer is accurate with the documents from the start, you can avoid many of the delay issues,” says Joe Metzler, a Senior Loan officer with Mortgages Unlimited in St Paul, MN.

A large percentage of Bank and Credit Union Loan Officers are not personally licensed, and should be considered more of a glorified application clerk versus a professional Loan Officer. This is because the rules do not require Loan officers at banks, credit unions, or mortgage companies affiliated with banks or credit unions to be licensed.

On the other hand, Loan Officers who work for non-bank mortgage companies, and for mortgage brokers are required to be personally licensed.  On average, the difference between a licensed and unlicensed Loan Officer can be dramatic.

Home Mortgage Loans in WI, MN, SDWhen working with a clerk, odds are the initial application will have disclosure errors that follow the file all the way to closing, ultimately resulting in a delayed closing.

Add  that to the TILA-RESPA disclosure rule change to be one of the biggest changes the industry has faced in years, and many companies are slow to be prepared to deal with the changes. This is especially true the larger the lender is. Software companies, lenders, mortgage industry vendors, and everybody else working on a deal are trying to figure out just what the CFPB now requires, which results in the delays.

Data from Ellie Mae, who provides mortgage loan software to a large portion of the mortgage industry has indicated the average time to close a home loan is clearly longer today than prior to the new rules, averaging 50 days to close a home loan.  This is an average of 10-days longer than it took one year ago.

Other data also shows the average home loan closing costs have gone up too, as lenders have had to hire more support personal to deal with the new rules.


Nationwide January Home sales dropped 9.2 per cent

Nationwide January Home sales dropped 9.2 per cent

Americans stepped back from buying new homes in January, as purchases plunged sharply in western states where prices are typically higher. The Commerce Department said Wednesday that new home sales fell 9.2 percent last month to a seasonally adjusted annual rate of 494,000. Most of the decline stemmed for a 32.1 drop in sales in the West. Sales also slipped in the Midwest, while edging up in the Northeast and South.New Construction Loans in MN, Wi, SD

There was a sharp fall in sales of newly-built single-family homes in January. The 9.2 per cent drop took sales to a seasonally-adjusted rate of 494,000 units according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The National Association of Home Builders says that the dip follows a stronger-than-usual December and the underlying trend is positive that after an unusually high December reading, some pullback is to be expected.

The inventory of new homes for sale rose to 238,000 in January, which is a 5.8-month supply at the current sales pace and the highest level since October

Building a new home? Find new Constructions Home Loans in MN, WI, and SD here.

Side note: I always chuckle at these monthly reports.  They really have little meaning on a monthly basis.  The long-term trend is the more important view.


The Mortgage Broker vs. The Bank

The Mortgage Broker vs. The Bank

Minneapolis, MN: When you are considering financing a home, you will have the choice to work with either a non-bank mortgage lender or a bank.  Non-bank lenders encompass many people, from a traditional mortgage broker, to correspondent lenders (think super broker), or direct lenders who are not banks.

Real Estate, Minnesota, Minneapolis, for sale, mortgage rates, interest rates
Get Pre-Approved Today – Click HERE

Most potential home buyers think everyone who isn’t a bank is a broker. While it is more complicated than that, for sake of this article, I’ll call everyone not a bank a broker.

Full disclosure. I work for a correspondent lender. We originate, underwrite, fund and close our own loans, then sell them to large servicers (typically a big bank) after closing.

Here are a few distinct pros and cons of working with a bank or a broker.

Brokers:

  1. Mortgage Brokers generally have lower operating costs and less overhead (hence the whole concept of broker to begin with)
  2. Mortgage Brokers generally have significantly more loan options as they provide the products of many lenders
  3. Mortgage Brokers generally are more knowledgeable and experienced. The Loan Officers at non-depository lenders (brokers) must be individually licensed, pass state and federal tests, and complete continuing education each year. Loan Officers working for a bank or credit union do not.
  4. Mortgage Brokers generally work 100% by commission, and need to deliver 100% satisfaction to our clients.
  5. Generally speaking, you work directly with your Loan Officer, and no one else to get through the maze of loan options, paperwork, etc.

Banks

  1. Banks are convenient because they often have many locations.
  2. Banks have higher overhead. All those brick and mortar locations, and paying for stadium naming rights gets pass on to you.
  3. Banks only offer their own products. They may not offer what you need.
  4. Banks will cross sell you on all their other products.
  5. Generally speaking, at banks, your Loan Officer is more typically a low level application clerk, vs. a true mortgage professional. You will generally be passed along to many people during the process.

Those are just 10 factors to consider, obviously there are many more ways to compare. But if I was doing my largest financial transaction of my life, I’d want an experienced person, with the largest amount of loan options, and with the least overhead, so I get the best possible deal – and that is almost never at a bank.


Average home price up 5.2% for Oct 2015

Home prices up 5.2%

Home Values UP
Home values up 5.2% Nationally for Oct 2015

The latest S&P/Case-Shiller Home Price Index shows that home prices were up nationally 5.2% in October 2015 compared to October 2014. That’s an increase from the 4.9% rise recorded in September 2015 over September 2014.

Denver, San Francisco, and Portland, Oregon all saw large 10.9% increases year-over-year.

The top 20 percent increased 5.5 per cent overall to return to their winter 2007 levels.

We are getting there, but these numbers still represent on average, around 13% below 2006 peak home values.


Finding the Best Mortgage Loan Officer

Minneapolis, MN:  Buying a home for most people is the largest financial transaction of your life. Finding the Best Mortgage Loan Officer  that is licensed, educated, experienced, professional and ethical is probably the most important decision you’ll make next to actually picking out that perfect dream home.

Most people these days pick their mortgage company one of three ways:

  1. Calling the bank where they have their checking account
  2. Going with whomever the Realtor suggests
  3. Online search (but usually only for the person quoting the lowest rate)

None of these in and of themselves are right or wrong, but here are some tips to know and understand:

First, understand that the mortgage company or bank that you choose in most cases has little to do with the success of your transaction. Essentially all mortgage lenders have and offer the same basic programs with the same underwriting guidelines. FHA loans for example are FHA loans no matter who you call, so in most cases, there is nothing special that one lender has over another.

Yet for others, there can be some differences, especially if you are on the edges in terms of loan approval. For example, a big bank with the stagecoach in their logo will not offer FHA loans over a 45% debt ratio, while some mortgage brokers (like us) will go to 50% debt-in-income ratio. This is a good example of why a mortgage broker may be a better choice, as they offer the products of multiple lenders, as opposed to just their own.

Using this one example, you may have lost out on your dream home simply because you chose the wrong lender.

Licensed Loan Officer Versus Simply Registered:

All mortgage Loan Officers must have a tracking / registration number known as an NMLS number. But having this number does NOT mean the Loan officer is licensed, or experienced.

Loan Officers at banks, credit unions, or mortgage lenders owned by a bank or credit unions can be, but are NOT required to be licensed in any way. Loan Officers at non-bank mortgage companies or brokers ARE REQUIRED to have an individual mortgage license.NMLS Consumer Access

You can check if your Loan officer is simply registered, or fully licensed by searching them on this public web site:  www.NMLSconsumerAccess.org.

At the bottom of the page, under licenses and registrations, there will either be one or more states listed, which means the person is licensed. If it indicates something similar to “Federal National Mortgage Originator”, this is a fancy name that means they are NOT licensed.

Being licensed versus simply registered does not automatically indicate if a Loan Officer is a good choice or not, but if one was doing the largest financial transaction of their life, I’d probably lien towards someone who has had to take schooling, pass state and federal testing, and is required to complete continuing education each year to be licensed, versus someone who didn’t have to do any of those things to simply be registered. Heck, even your hairdresser needs a license!

Using this example, you may have lost out on your dream home because of the the unlicensed, and inexperienced Loan Officer you chose.

Understanding Closing Costs and Interest Rates

Not only do most lenders only offer the same underlying loan products as everyone elsemortgage closing costs (Fannie Mae, Freddie Mac, FHA Loans, VA Loans, USDA Loans), but they all have the same underlying closing costs,  get the money to lend you from the same source, and interest rates are based on the same bond market everyday.

This is why you’ll notice all standard rate quotes are almost identical. This is why you’ll notice all closing costs quotes are almost identical.

All lenders have the same actual closing costs; appraisal, credit report, state deed taxes, county recording fees, title company charges, underwriting, origination fees, etc.  However, how lenders charge them to you can vary, and this is tied directly to your interest rate.

For example,  assume your shopping, and one lender says your closing costs are $5,000, and the next says $3,500. The lower price sounds good, and that would be true if the rates were the same. But they almost never will be.

More overhead equals higher rates

Advertising and buildings are expensive. The previously mentioned “Quick” lender for example advertises all day everyday on all TV channels, and radio stations all across the country.  You can’t go anywhere on the internet without seeing one of their advertisements.

How much does all that cost?  Must be millions. You are foolih to think that higher cost isn’t passed along to you in terms of the interest rate they charge you.

Sames with the big lenders with branches everywhere, and paying hundreds of millions for stadium naming rights.

Lender Credits

Lender credits towards your closing cost is a tool lender use to lower your out-of-pocket closing costs up-front by slightly increasing your interest rate. Mortgage interest ratesBy doing this, the lender requires less initially because they make it up by collecting more in interest over time.

Some lenders start right out of the gate by saying they don’t charge origination, or maybe they will pretend to pay for things like your appraisal. Someone is paying those items, and it is always you.

Now there is nothing wrong with taking a slightly higher rate to lower costs today. We do it all the time. But just understand that you are still paying for those costs, just in a different way.

Look at this 30-yr fixed screen shot from today for a $200,000 loan. At 3.875%, lender would charge $750 in discount points to “buy” this lower rate, but at 4,125%, lenders would reduce your closing costs with a lender credit of $2,250. The monthly payment difference between the two rates is $29.00.

Internet Lenders

There is nothing an internet lender can offer you that the local mortgage lender down the street can’t offer. They do not have lower rates, they do not have lower closing costs. But there are many things the internet lender can’t offer.

One big item is local knowledge, and dedication to the community. Some kid working in a cube in Detroit, MI could care less about my back yard or Minneapolis, St Paul, MN.

I constantly get phone calls from people who started a mortgage application with a big internet lender, who is “Quick In” mortgage.  They complain about high pressure sales, lack of product knowledge, mandatory up-front fees, failed closings, and more.

I also get a lot of calls from people who filled out an inquiry form at places that “Lend from a Tree”. Funny and cute commercials about applying in your underwear, but this place isn’t even the lender.  Rather, they take your name, then sell it to as many real lenders as possible for around $40 a lead. You are then inundated with calls from all these lenders trying to one up the other with false and misleading promises to get you to use them.

Big out-state internet lenders also NEVER have the ability to offer any state of local first time home buyer, or down payment assistance programs.

Using this example, you may have lost out on your dream home because you picked an out-state internet lender who doesn’t offer all the loan products available in your area.

Realtor Referrals

In theory, a Real Estate Agent referral to a Loan officer should be something of value, but not always. This is essentially because there are two underlying types of referrals.

A referral because the Real Estate Agent has worked with the Loan Officer for a long time, and knows them to be a licensed, knowledgeable, experienced mortgage professional looking out for your best interests. This is a good referral.

A referral because the Loan Officer works for the same company, or otherwise is heavily influenced by the owners of the Real Estate Company to refer to a specific lender or internal Loan Officer simply because it makes someone else money regardless of the qualify of the Loan Officer.

While not automatically bad, the second type of referral is highly suspicious. Tips to this type of referral are that the Loan Officer works for the same company, they share office space, or if you have already told your Real Estate Agent you have a lender you are happy with, and they become pushy or start talking negatively about your choice to get you to go to their choice.

The Bottom Line

As you can see, your Loan Officer choice is important. Ask questions, get answers. Just because someone refers, they advertise a lot, or appear to be quoting a super low rate or closing cost doesn’t mean they are the best for you, or that you shouldn’t shop or get a second opinion.

Take the time to pick a great lender, just as you take the time to pick the perfect house.

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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 #98 of the Top 100 Loan Officers in the Nation for 2015 by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681


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.


Mortgage loans. Why all the paperwork?

Mortgage loans – Why all the paperwork?

Loan PaperworkAs a Loan Officer serving Minnesota, Wisconsin, and South Dakota, I am constantly asked why is there so much paperwork required to get a mortgage loan today. It seems that the lender wants to know everything about you these days, and you would be correct. Your mortgage lender does want to know a lot about you.  If you were to give a complete stranger a huge loan, for a 30-year commitment, what would YOU want to know about them?

To make it feel worse than it really is, from about 1999 until 2007 during the housing boom, there were many programs available that allowed for limited documentation, or even no proof of income. Many people took advantage of those programs. Unfortunately, a large number of those people were allowed to bite off more loan than they would have been allowed if they proved income, contributing to the real estate collapse starting in 2007.

Loan Documentation Requirements Today

No one wants foreclosures and bad loans. It isn’t good for the home buyer, the neighborhood, or the economy.  For that reason, mortgage companies need to verify and double check everything on the application, and to make sure you are a good risk.

There are three very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

  1. The mortgage industry was a bit too trusting in the past. Lenders for example asked for a pay stub, but we took what you provided at face value, and there was no double check. This allowed fraud to become rampant. How hard would it be to scan a W2 that said you made $30,000 a year into a computer, then use Photoshop to change that the 3 to an 8, and now you make $80,000 a year income.
  2. Even without fraud, during the run-up in the housing market, many people qualified for mortgages that they realistically could never pay back. The government has mandated new guidelines that now demand that the mortgage lender  prove beyond any doubt that you are indeed capable of affording the mortgage. The rule is called ATR, or the “Ability to Repay” rule. So no more stated income, or limited income loans.
  3.  The lenders have never wanted to be in the real estate holding business. Since the collapse, lenders suffered huge losses that came close to destroying the economy, and were were forced to take on the responsibility of liquidating millions of foreclosures,  and negotiating millions of more homes in short-sales.

The Good News About Mortgage Loans

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process. If you got a loan ten to 20-years ago, yes, it was easier. But at the same time, if you never experienced that in the past, your fame of reference is that it really isn’t all that difficult today.

Instead of complaining about the paperwork required, be thankful that that you can get a loan, and get it at these amazingly low mortgage interest rates.