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

 


USDA to lower mortgage insurance costs

USDA to cut loan mortgage insurance costs

The USDA Rural Housing home loans will soon get  cheaper for homeowners with lower mortgage insurance costs.

USDA Rural Development LoansUSDA announced last month that it was lowering its upfront mortgage insurance premium fee to 1 percent of the total mortgaged amount, down from the current from 2.75 percent. This amount is added to the borrowers loan.  So someone today borrower needing a $100,000 loan would actually have a $102,750 loan. Under the new guidelines, the same borrower would have a $101,000 loan.

The monthly mortgage insurance on a USDA loan will also be reduced from the current .50% to just .35%.  On that same sample $100,000 loan, this means a monthly mortgage insurance drop from $42.84 a month to $29.99 a month.

The change becomes effective Oct. 1, 2016, and will bring the fees and insurance premiums down to pre-recession levels.

The agency said that the cuts were possible because of the bulk of the mortgage and housing crisis is over, and foreclosure rates have fallen to back to more traditional numbers.

Learn more about USDA rural housing home loans in MN, WI, and SD.


Consumers disqualify themselves for home loans

Consumers Misjudge Max Debt-to-Income ratios… and Disqualify Themselves from home loans

According to a survey by Fannie Mae’s Economic and Strategic Research Group, many consumers think it’s difficult to get a mortgage in today’s market.images98735

And forty five percent of those respondents cite too much existing debt as a top reason. Yet, in that same group, more than half don’t actually know the maximum debt-to-income ratio (DTI) required by lenders.

The result — potential buyers may be wrongly disqualifying themselves before they even apply for a mortgage.

That’s why it’s key to provide information, resources, and tools to educate consumers on the mortgage process, and any perceived barriers, including Debt-to-Income guidelines.

This is also why it is key for the consumer to work with a fully licensed and experienced Loan Officer, versus the more common unlicensed mortgage loan application clerk, who can help you determine the best home loan program, and explain the various program rules and guidelines. On a regular basis, I come across clients who think they can’t be approved for a home loan, yet they can. On the other hand, I also run across plenty of people who have no chance of getting a home loan today, yet they apply.

The bottom line is that it never hurts to apply. You may be given a pre-approval for your dream home, and if not, you’ll be given details on how to improve your situation to be able to qualify later.

Learn more about how to choose a mortgage loan officer here.

Download more insight on DTI and learn about the overall study here.


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.