Better credit score tips

CREDIT SCORE TIPS

Are you making this credit score mistake?

Many people believe that running up credit card balances, then making on time payments or paying it in full each month will build higher credit scores.  This is a MYTH!

You don’t need to carry a balance or use your card in order to build credit.

This pervasive myth usually gets said around a dinner table or past among friends, and of course is all over the internet – but is a terrible piece of advice — especially if you have bad credit to begin with.

Credit score factors

Carrying a balance says you have credit, need the credit, and are unable to pay off the balance. This is considered poor utilization of credit, and results in bad credit and lower credit scores.

Carrying very little balance, or better yet, no balance, says you have credit available, hardly ever use it, and can pay if off quickly – Which are all GOOD traits and result in good credit and better scores.

You should never carry a balance if at all possible, pay down as much as possible each month if you must carry a balance – and never ever have a late payment under any circumstances to have rock’in credit scores.

When the time comes to buy a home, you want the highest credit scores possible to get access to the most programs and the best interest rates.

Contact our Mortgage Experts at (651) 552-3681 of apply online at www.MortgagesUnlimited.biz


Relaxed student loan guidelines makes qualifying easier

Minneapolis, MN: Student loan debt is at an all time high, and has been well noted as a major contributing factor to why may people have been unable to purchase a home, especially first time home buyers.

Recent changes to Fannie Mae and Freddie Mac guidelines have made it easier for some, but not all with student loan debt to still qualify for home mortgage loans.

Fannie Mae and Freddie Mac do not do home loans. Rather they buy loans from lenders after that fact. Both Fannie and Freddie have set underwriting guidelines that if lenders follow, makes the selling of loans to Fannie Mae and Freddie Mac much easier.  While the number moves, at any given time, Fannie Mae and Freddie Mac control +/- about 60% of all home loans.

Student Loans. How do lenders calculate?

Student loans can be in active repayment, some sort of reduced repayment (which is typically an income based repayment), or completely deferred.  While a student loan may be deferred for the next year or two, your mortgage loan is typically a 30-year loan. It only makes sense that lenders take current or future student loan payments into consideration when calculating debt ratios and affordability.
To avoid confusion, I’ll just talk about current guidelines for how lenders currently deal with your student loan debt for debt-to-income ratio purposes.
These guidelines are current as of this article (Oct 5, 2017).

FHA Loans:

FHA loans must use the greater of 1% of the outstanding balance, or the payment listed on the credit report, unless you can document the payment is a fully amortizing payment. No income based repayment, graduated payments, or interest only payments allowed.

Fannie Mae Loans:

For deferred loans, must use 1% of the outstanding balance. For loans currently in repayment, use the payment listed on the credit report. If payment is listed as $0.00, but $0.00 is an active income based repayment, we must verify with the student loan company that $0.00 is the income based repayment.

Freddie Mac Loans:

For deferred loans, must use 1% of the outstanding balance of the loan, or the estimated payment supplied directly from the student loan company. For loans in repayment, use the amount listed on the credit report.

USDA Rural Housing Loans:

For USDA loans, if the loan is deferred, income based payment, graduated payment, or interest only payment, must use the greater of 1% of the outstanding balance, or the amount listed on the credit report.

VA Home Loans:

For VA loans, if payment is deferred at least 12 months past the loan closing date, no payment need be listed.
If payment will begin within 12 months of closing, use the payment calculated based on:
  a) 5% of the outstanding balance divided by 12
  b) The payment listed on the credit report if the payment is higher than calculated under (a).
  or
If payment on credit report is less than (a), a letter, dated within the last 60-days directly from the student loan company that reflects the actual loan terms and payment information is required to use the smaller payment.

More people with student loans now qualify

These updated guidelines primarily help those currently in repayment, but with income based, graduated payment, and interest only payment student loans obtain conventional loans.
 Regardless of your student loan status, I always suggest that people never assume you can’t buy a home.  Always talk with a professional licensed Mortgage Loan Officer to get the facts regarding any financing options.  I offer all this loan option and more for properties in Minnesota, Wisconsin, and South Dakota and can be reached at (651) 552-3681, or www.MortgagesUnlimited.biz


Equifax, Credit Freeze, and Getting a Mortgage Loan

With the latest hack of personal information from one of the big three credit bureaus, the topic of freezing your credit report to prevent identity theft is back in the news.

Having a credit freeze on while getting a mortgage loan can cause huge headaches.

A credit report freeze, does exactly as the name implies.  It freezes your credit report so that no one can access or view the file until you unfreeze, or temporarily lift the freeze on your credit report. A credit report freeze prevents many types of fraud, especially the opening of new accounts in your name, but DOES NOT prevent the most common fraud, which is stolen credit card numbers.

Personally, I think credit freezes are awesome. The credit bureau’s make them more difficult than realistically needed to both freeze and unfreeze your account, taking up to three days to lift a freeze, and charging money for the service. That is why is hasn’t caught on with the basic public.

Why do they make it hard to freeze / unfreeze?

Simple. Follow the money.

Discover Card has for some time, and other credit cards are catching on with apps for smartphones, where their clients can instantly turn on and off their credit card, effectively preventing anyone from charging on the card.  The credit bureaus could do the same for your entire credit report, but choose not to.

The main reason is money.  For example, all those pre-approved offers you get in the mail? The creditor paid for those reports. If everyone has a frozen credit score, this limits the credit bureaus income and ability to sell those pre-approved reports.

Mortgage Loans and Credit Freezes.

When applying for new credit, and in this case, specifically a mortgage loan, your lender will see nothing, and get no scores if your account is frozen. Of course you will need to lift the freeze, as your mortgage lender will need to review your full credit report.

Where the problem come in for mortgage lending, is your lender actually needs to potentially have access to your credit report during the entire loan process, not just the first day when your Loan Officer pulls your initial credit report.

In order to be able to provide them a mortgage loan they must unfreeze their credit, ideally until closing. If they do not want to leave the freeze off that long, they will need to unfreeze it any time we need anything related to credit; first pull, re-scores, supplement reports, re-issue reports, and finally a credit report lenders look at just prior to closing to see if you’ve applied for any new credit.

The last report, known as an LQI report, is especially problematic. Your mortgage lender will pull this report generally within about the last five days prior to closing. If your report is frozen, we have to stop and call you to get it lifted.  It may take up to three days to unfreeze your report, potentially delaying your closing.

Therefore, mortgage lenders will ask all clients, if they have a freeze on their credit prior, to unfreeze their credit report until the day of the home loan closing.


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.


What are mortgage loan closing costs, and why do I pay them?

Home buyers, especially first time home buyers, commonly fail to understand all the costs involved in buying a home.  Everyone understands down payment, so no issues there. But mortgage loan closing costs are a whole different story.

I often hear potential home buyer comment that they thought they had saved enough for a down payment, only to be blind sided with mortgage loan closing costs.

WHAT ARE MORTGAGE CLOSING COSTS?

All mortgage loans have closing costs. They include appraisal, credit report, state taxes, title company fees, loan origination fees, state deed taxes, and more.  You also have what is known as pre-paid items, which include pro-rated property taxes on the house you are buying, and paying for the first years home owners insurance up-front.

Actual closing costs and pre-paid items can easily range from about 2% to 8% of the sale price of a home, depending on where you live, and the purchase price of the home.

Your Loan Officer will provide you with a detailed estimate of these closing costs based on the actual home once you pick it out, and can give you a good ballpark number during your initial loan review.

TIP: Anyone telling you closing costs are always a certain percentage is flat out simply wrong.

HOW TO PAY CLOSING COSTS

Yes, closing costs can really add up.  If you were planning on a 10% down payment, this means you really need 12% to 18% of the purchase price of the home.  Yikes.

The good news is, the mortgage industry understands this, and allows you to pay closing costs multiple ways.

Option 1) Pay cash out of pocket. Always the best move, but incredibly burdensome for most home buyer.

Option 2) Seller paid closing costs. You simply ask the seller to pay your closing costs for you when making your offer. Depending on the loan program you are using, the seller can pay between 2% and 6% of the purchase price in closing costs on your behalf. While this sounds free, because the ‘seller’ is paying them for you, the reality is the seller isn’t paying anything. Rather, this is a method of you rolling the closing costs into the loan itself.

For example, the seller is asking $200,000 for the home.  You offer $200,000 – but also ask the seller to pay $6,000 of your closing costs. If the seller agrees, many people think they just got free money.  The reality is the seller has accepted $194,000 in their pocket. So you could have bought the house for $194,000, and paid your own closing costs.  Instead you are buying the house for $200,000, and paying closing costs over time, versus out-of-pocket today.

It is a little more obvious to buyers that they are paying over time, when the same seller who wanted $200,000 refuses to budge, but you need closing costs rolled in to lessen your out-of-pocket burden. In this case, you’d restructure your offer to $206,000, and have the seller pay the $6,000 of closing costs.  The seller gets what they wanted, and you rolled closing costs into the loan, again paying over time instead of out-of-pocket today.

Option 3) Lender Paid Closing Costs (also known as Lender Credits). Under this option, the lender will reduce your actual real closing costs by increasing your interest rate. You can choose to increase your interest rate a tiny amount, for a tiny reduction in closing costs, all the way to completely eliminating all of your closing costs with a much higher interest rate.

This isn’t a good or bad option, rather it is a depends option. How much reduction do you need? Do you have all the closing costs money today? How much higher will the payment be?  How long will you live in the home?

TIP: ALL LENDERS HAVE ESSENTIALLY THE SAME TRUE CLOSING COSTS. When shopping lenders, many people will receive a closing cost quote lower than someone else, giving the illusion of a better deal. Many banks and lenders claims things like they give free appraisals, or never charge loan origination fees. No closing cost loans were all the rage a few years ago.

Little do many people realize that all these lenders are doing is increasing your loans interest rate to cover these items, but not telling you they are doing it. They don’t work for free, and someone has to pay the appraiser.  This lower closing cost ploy makes unsuspecting home buyers potentially pick a lender based on a perceived better deal, when in fact, it isn’t. You pay, you always pay. How do you choose to pay? Lower rate = higher costs.  Higher costs = lower rates.

Option 4) Any Combination. This is actually the most common way people pay closing costs. Many ask the seller to pay some, maybe increase the rate 1/8 or 1/4% to pay some, and maybe a little bit out-of-pocket to pay the rest.

CLOSING COSTS – THE BOTTOM LINE

It is very common for many home buyers through these options, to completely eliminate closing costs as an out-of-pocket expense, leaving them with just needing their down payment to buy the house.

So don’t ever let the fear of closing costs keep you from buying your dream home.

 


Millennials are not buying homes. Is this true or myth?

There has been a lot of talk that millennials are not buying homes. Is this true or myth?

First, while the purchase numbers for millennials are down, millions of people buy homes every year, including millennials.

Most of the talk about millennials centers around the inability to purchase a home because of student loan debt. Studies after study does show that tuition costs are up, and that student loan debt has roughly doubled in the past 10-years. There is also a noticeable decline in homeownership rates among millennials the past decade.

Too much debt reduces the maximum amount of home lenders will allow someone to purchase. This is known as debt-to-income ratios.  Less that 30% of your income spend on just the home is considered as a safe house payment, while under 45% of income should be spent on the house, plus car loans, credit cards, student loans, etc.

But is is all really student loan debt, or are there other factors involved.

Estimates suggest that around 35% of the decline in homeownership in the past 10-years is simply due to student loan debt. That leaves  whopping 65% to other factors.

Assuming these numbers are accurate, and many suggest the student loan blame is not nearly as high as believed, I as an actual Mortgage Loan Officer, can attest that yes, student loan debt is a factor in some cases. But I see many other factors on a daily basis, the biggest being simply a low desire to own. This primarily resulting from observing their parents, friends, neighbors, and relatives suffer through the housing bust that started in 2007.

Other items I see include very poor credit, and a lack of knowledge on how credit and credit score work. Lack of down payment, and a lack of willingness to purchase a starter home. Many of the millennials believe they should jump right into a big, beautiful, white picket fence dream home as their first home.

Lack of Starter Homes?

I, like many people started with an old small home, in a not so perfect neighborhood.  As I got older, got married, and increased our family income, I moved up into bigger and nicer homes, until now currently being in my existing “big beautiful home” for 19-years.

The me me me, now now now, pay for it later attitude really crept into society over the past 20-years.  Having champagne taste for homes on a beer budget has held back more potential first time buyers from purchasing a home than most other items I see everyday. They simply refuse to buy a starter home.

Granted, a starter home today tends to have a heftier price then years back.  As a percentage of income, low end starter homes suck up more of the owners paycheck than ever before. This too has a huge effect on first time home buyers, regardless if they have a college degree, and student loan debt or not.

Poor Credit

Another major issue I see is simply poor credit. As the days go by, it would appear to me that the population has become dumber and dumber about simple concepts, like paying your bills on time. It is very common for me to see potential home buyers in the 25 to 30-year old range have horrible credit. Then when they realize the poor credit prevents them from buying a home, it may take them a few years to improve their credit.

More than just student loan debt

The New York Fed recently reported that an estimated 360,000 people would have bought a in 2015 had tuition costs remained the same as they were in 2001. There is no doubt student loan debt has been a factor.

As an actual Loan Officer, active in the business currently, and having been so for more than 20-years, I am simply saying there are a multitude of reasons why people don’t buy homes.

The constant banter of it being student loan debt preventing ownership is heard by potential home buyers who have student loan debt. Many clients I speak to start out the conversation saying the don’t think they can buy a home because of student loan debt, and are very pleasantly surprised when I issue them a Pre-Approval Letter.

Of course every person and every situation is different.

Don’t Assume

If you want to buy a home, regardless of age, income, or student loan debt. DO NOT ASSUME. Contact a local mortgage broker in your area (I lend in MN, WI, and SD). Give them a full mortgage loan application so they can zero in on your individual situation.  You too may be pleasantly surprised, and enjoying the benefits of home ownership next month.

 


MN, WI, and SD Homeowners Urged To Switch To A 15-Year Fixed Mortgage

MN, WI, and SD Homeowners Urged To Switch To A 15-Year Fixed Mortgage

If you still owe on your MN, WI, or SD home, you really need to consider switching to a 15-year fixed. Here at Mortgages Unlimited, many of our Loan Officers, including myself **, have made the switch to 15-year mortgages because we’re obsessed with getting the right mortgage and we know all the advantages 15-year mortgages provide.

Using a sample $200,000 home loan, homeowners with a 15-year mortgage can save over $113,000* over the life of their loan. We also help homeowners lock in historically low rates that will never rise. At Mortgages Unlimited,  it’s all about helping homeowners find a mortgage they can be confident in, and what better mortgage to offer than the one our own Loan Officers, including myself have.

Get A Mortgage Review Today And See How Much You Can Save With A 15-Year Fixed

15-Year Mortgages Help Homeowners Pay Off Their Homes In As Little As Half The Time And Save Up To $113,000 OR MORE In Interest Payments *

The reason for this is pretty simple. To pay off your house, you have to pay off the principal. In a 30-year mortgage your first 10 years of payments go mostly towards paying interest on the loan – meaning for 10 years you aren’t making a lot of headway towards paying down the principal. In a 15-year mortgage you attack the principal you owe on your home and depending on what your current 30-year mortgage rate is you could actually do so for about the same monthly payment. Think about that, homeowners who switch to 15-year mortgages:

1) chop up to 15 years off their mortgages,
2) save up to $113,000* OR MORE in interest payments, and
3) may be able to do so while keeping their monthly mortgage payments pretty much the same, depending on your current loan and interest rate

How To Switch To A 15-Year Fixed?

It is easy. Start by completing an online application, or call our mortgage experts at (651) 552-3681. We’ve streamlined the refinance process and our team of fully licensed Loan Officers can tell you how much you can save by switching to a 15-year fixed. It only takes about five minutes to use the easy online form to get connected to mortgage experts, and our radically simple mortgage experience can help you see very quickly if you’re in the right mortgage or not. It can’t hurt to look. Rates for 15-year fixed mortgages could be on the rise soon so now is the time to check your eligibility.

Probably because the 15-year payment will be a bit higher than your 30-year payment. While true, most people can easily afford it, and take advantage of the huge savings. We also think it’s probably because homeowners don’t realize the crazy amount they pay in interest payments to have a 30-year mortgage. If homeowners knew they’d have to pay up to an extra $113,000* in interest payments to have a 30-year mortgage instead of a 15-year, we’re guessing most homeowners would make the switch. What we do know for sure is that Mortgages Unlimited delivers a simpler mortgage experience, and that we can quickly help homeowners calculate how much they could save by switching to a 15-year fixed.

Apply Online
No Obligation to apply, and see what YOU qualify for.

Start your savings today!

* Savings based on sample $200,000 loan between current 30-yr rates at 4.00% versus 15-yr rates at 3.25%.

Your savings may be much greater or smaller depending on your loan size. Not an offer to enter into an interest rate lock agreement per MN Statute. Not everyone will qualify. Rates subject to qualifications, and can change daily. A full application is required to lock a rate. Equal Housing Lender. NMLS 274132.  ** Joe Metzler


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

 


Why do I need mortgage insurance??

Why do I need mortgage insurance?

When buying a home, and getting a home loan, being approved or not all comes down to risk. If the mortgage company thinks you are a good risk, you get the loan. If you are too risky, you get denied. Pretty simple concept.

A good example of this concept is down payment size.  If you put at least 20% down, you are considered a good risk. Put less than 20% down, you are high risk. Needless to say, not everyone can put 20% or more down payment.

To minimize the lenders risk on small down payment loans, but yet allow for these same small and more affordable down payments, a tool called mortgage insurance, commonly referred to as PMI, or private mortgage insurance is available.

The insurance policy you are required to obtain and pay for as part of your monthly mortgage payment essentially provides protection to the lender in case you default on the loan, and covers the lender for the amount between 20% down and what you actually put down.

The cost of the mortgage insurance depends on multiple factors, but primarily down payment size, credit scores, and loan type.

The smaller your down payment, the higher the mortgage insurance costs. The lower your credit score, the higher the costs.  For example, A client with 10% down and an 800 credit score on a 30-yr fixed loan might pay about $30 a month per $100,000 loan amount for mortgage insurance. The same 10% down, but a client with just a 640 credit score might pay as much as $105 per month per $100,000 loan.

Contact your loan officer for exact monthly costs for your individual situation and down payment size, as this article covers basic and most common situations, but does not encompass every possible situation.

Typicaly standard PMI will automatically fall off your loan once you reach 78% of the original loan amount with no interaction from the homeowner. It is simply automatic.

You can request to have mortgage insurance removed from your loan once you believe you are at 80% of the original loan. The 80% mark can be based on a combination of paying down the loan, and today’s appraised value.  For example, you put 5% down when you bought the house, you’ve paid down through payments another 5%, and the home has appreciated 14% since you bought it.  That would put you ate 76% loan-to-value. So contact your lender on their proceedure to have mortgage insurance dropped.

Must Deal With Mortgage Insurance

If you are putting down less than 20%, you MUST deal with mortgage insurance somehow. Other than monthly mortgage insurance, lenders can also offer more creative options. The most popular is known as ‘lender paid mortgage insurance’, where the lender increases your interest rate, and uses the extra money to buy mortgage insurance. You still have it, but it doesn’t show as a monthly cost.

The next is known as ‘single premium’ insurance. Under this option, you pay a one time lump sum amount up-front at closing equal to 3-years of monthly mortgage insurance.

The last option, is getting two loans. An 80% first mortgage, and a second mortgage to cover the difference from what you have for down payment. This is a viable option primarily for high credit, low risk clients, and for jumbo loans over $424,100.

While these options may sound enticing, for most people, balancing up-front costs, long-term versus short-term costs, and overall benefits based on individual situations can become a mind numbing challenge.  Suffice to say the vast majority of people go with standard monthly mortgage insurance for a reason.

FHA Loan Mortgage Insurance

FHA loans also have mortgage insurance, but this insurance is significantly different from conventional loan mortgage insurance.

Most people using FHA loans put the minimum down payment of 3.50%, and take a 30-yr fixed loan. Most FHA mortgage insurance is the same for everyone regardless of down payment size or credit score.  For small down payments, this is roughly $85 per month per $100,000 loan amount.Next, FHA mortgage insurance for small down payments is called ‘Life of Loan’ insurance, which means regardless of future loan-to-value, appreciation, or what you’ve paid down, FHA mortgage insurance never goes away. The only way to remove it is to refinace the loan.

Another item with FHA loans, is that regardless of down payment size, ALL FHA loans will have insurance. So contact your loan officer for exact monthly costs for your individual FHA insurance, especially if you are putting more than 10% down or picking a 15-year loan.

PMI is Not Homeowners Insurance

Mortgage insurance often times gets confused with home owners insurance.  PMI protects the lender from default, while home owners insurance protects the owner for items like fire, storm damage, theft, etc.

VA Loans Have NO Mortgage Insurance

If you are active or former U.S. military, you have a great benefit in a VA Home Loan. Most people know VA loans generally do NOT require a down payment, they also have NO monthly mortgage insurance.  This can be a huge monthly savings over other loans.

———–

Author 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.  He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681. NMLS 274132.


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.


Your house is NOT worth what YOU think it is

Your house is NOT worth what YOU think.

Minneapolis, MN:  We’ve all had to listen to someone who, regardless of what the professionals tell them, simply believe their house is worth more than everyone else’s home.

Just because you reclaimed wood from the bottom of the Amazon River, put in a $50,000 landscape job, or installed super top end granite counter-tops, and just about any other high end item installed in your house;  doesn’t mean potential buyers of your home are willing to shell out extra money for it.

Most potential buyers generally don’t care if you spent $30,000 in your kitchen, or $80,000 in the kitchen.  Most buyers are only going to offer you what they feel the home is worth compared to similar homes down the street.

Keep in mind, that if you build a custom home, or add expensive upgrades to the home, do it because you love it, not because you expect to get the money back when you sell. The more unique the home, the smaller the pool of potential buyers.

Of course because I am a mortgage lender, I need to talk a little about refinance appraisals too.  Essentially many of the same items apply to the value of your home during a refinance.  The appraiser is going to look at same or similar homes in your area to determine your value too.  The new roof and windows are maintenance that PREVENTS your home from losing value.  Not improvements to increase value.

You are always better to be the lowest value home in a high value neighborhood than the other way around.

Your home is not worth what YOU think it is, it is worth what others think it is.

Minneapolis, MN:  We’ve all had to listen to someone who, regardless of what the professionals tell them, simply belive their house is worth more than everyone else’s home.

Just because you reclaimed wood from the bottom of the Amazon River, put in a $50,000 landscape job, or installed super top end granite counter-tops, and just about any other high end item installed in your house;  doesn’t mean potential buyers of your home are willing to shell out extra money for it.

Most potential buyers generally don’t care if you spent $30,000 in your kitchen, or $80,000 in the kitchen.  Most buyers are only going to offer you what they feel the home is worth compared to similar homes down the street.

Keep in mind, that if you build a custom home, or add expensive upgrades to the home, do it because you love it, not because you expect to get the money back when you sell. The more unique the home, the smaller the pool of potential buyers.

Of course because I am a mortgage lender, I need to talk a little about refinance appraisals too.  Essentially many of the same items apply to the value of your home during a refinance.  The appraiser is going to look at same or similar homes in your area to determine your value too.  The new roof and windows are maintenance that PREVENTS your home from losing value.  Not improvements to increase value.

You are always better to be the lowest value home in a high value neighborhood than the other way around.

So what IS your home worth? It is only worth what others think it is, and what an appraiser says it is.


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

 


Low down payment, no down payment loan options for 2017

Minneapolis, MN:  Just 10-years ago, 30-year fixed rates were 6.125%, and the real estate market was hot. With rising interest rates, 2017 may be a bit more challenging for home buyers. But the biggest challenge for most people who wish to buy a home is down payment.

You do not need 20% down payment to buy a home! I repeat, you do not need 20%. This large down payment myth has been around forever, but it simply isn’t true for the vast majority of people buying their first primary residence. There are many program that allow for no down payment, or low down payment. Some jumbo loans buyers (loans over $424,100 in most parts of the county), as will people buying investment properties will usually need a large down payment. But for the rest of us, there are many low down payment, no down payment loan options for 2017.

First Time home buyers, Down Payment Assistance

First Time Home Buyer programs:

The term first time home buyer program covers a wide net of potential programs and options. To be a first time home buyer, you simply must not have owned a home in the past three-years. If you owned a home in the past, but it has been longer than three-years, you are a first time home buyer again. Some options allow for lower rates, cheaper mortgage insurance, and even down payment assistance. Most come with additional strings attached, like household income requirements, lower debt to income requirements, and that you must take first time home buyer education classes.

FHA Loans:

FHA backed loans are very popular, and only require a small 3.50% down payment. The down payment can be your own money (checking/savings/retirement), a gift from a family member, or can come from a down payment assistance program. FHA loans are more forgiving than other loans, for example allowing just a two-year waiting period if you have a previous bankruptcy, and a three-year waiting period after a previous foreclosure. Maximum loan limits apply based on the medium income of the county the property will be located.  Check FHA Loan Limits

Conventional 97 Loans:

Both Fannie Mae and Freddie Mac offer a 3% down payment program.  The down payment can be your own money (checking/savings/retirement), or a gift from a family member. This is a great program, especially for those with higher credit scores, or homes that need a little TLC that might not pass FHA loan inspections.

Conventional HomeReady™ Loans:

Fannie Mae offers an additional 3% down loan called HomeReady for first time home buyers. You need to take a home buyer education class, but you’ll be rewarded with lower interest rates, and lower mortgage insurance than the standard 3% down conventional loan.

Conventional 95 Loans:

Both Fannie Mae and Freddie Mac offer a basic 5% down payment program.  This is your everyday, plain vanilla mortgage loan available to everyone.

VA Loans (100% financing):

Available for active or retired U.S. Military personal, the VA loan is truly one of the best benefits this country offers for your service. The VA loan is a no down payment program, and also has no mortgage insurance whatsoever. This is a huge savings per month over any other low or no down payment loan. Closing costs can be rolled into the loan, making for a home purchase, that for most people, is about as close to zero money out of pocket to buy a home as you’ll ever get.

USDA Rural Housing (100% financing):

Available to those wishing to buy in more rural areas of the country, the USDA Rural Development loan does not require a down payment. While the loan does have mortgage insurance, the cost is very low compared to other loans.  You need to meet household income, and property location requirements.

Down Payment Assistance:

Down payment assistance comes in many different flavors from neighbors, city, county, and even state programs. Welcome first time home buyers. Apply onlineGenerally these are in the form of a loan that needs to eventually be paid back, but there are a very small number that are actually forgiven if you live in the home a set period (like 9-years or longer). The assistance loan can be combined with a standard loan, like an FHA loan, to be used for down payment. Household income, and property location are common requirements.

The Bottom Line:

If want to own your own home, you have OK or better credit, a stable income, and at least a little money in the bank, by all means, you should apply for a home loan. Your 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.

Best case, you’ll be in your own home sooner than you thought.  Worse case, your Loan Officer will go over what you need to do to be in position to buy a home in the near future.  Either way, a win win for you.