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Home ownership IS cheaper than Renting

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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.

What is your home worth? Find out for free…

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banner_ad_appraisalWhat’s the value of your home? (MN & WI Only)

Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, everyone has lost value.

But things are changing, average home values the past 12 months in the Minneapolis / St Paul, MN area have risen on average 14.1%.  So what your home is worth today?

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

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

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

Want to check your homes value? Simple click the link below! (MN and WI homes only)

FREE HOME VALUE ESTIMATE

 

HARP 2. Underwater Refinance Program changes announced

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FHFA, Fannie Mae and Freddie Mac Announce HARP Changes to Reach More Borrowers

Washington, DC – The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the Enterprises), today announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.

“We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach,” said FHFA Acting Director Edward J. DeMarco. “Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises.

Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.” Fannie Mae and Freddie Mac have helped approximately 9 million families refinance into a lower cost or more sustainable mortgage product, approximately 10 percent of those via HARP.

HARP is unique in that it is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. This program will continue to be available to borrowers with loans sold to the Enterprises on or before May 31, 2009 with current loan-t0-value (LTV) ratios above 80 percent.

The new program enhancements address several other key aspects of HARP including:

  1. Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
  2. Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
  3. Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
  4. Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
  5. Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

An important element of these changes is the encouragement, through elimination of certain risk-based fees, for borrowers to utilize HARP to refinance into shorter-term mortgages. Borrowers who owe more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of today’s low interest rates by shortening the term of their mortgage.

The Enterprises plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by November 15.  Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.

Borrower Eligibility

In general, borrowers must meet the following criteria:

  1. The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  3. The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  4. The current loan-to-value (LTV) ratio must be greater than 80%.
  5. The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

Homeowners can determine if they have a Fannie Mae or Freddie Mac loan by going to:

FANNIE MAE LOOKUP or calling 800-7FANNIE (8 am to 8 pm ET)

FREDDIE MAC LOOKUP or 800-FREDDIE (8 am to 8 pm ET)

Home sales UP 34% over 2010

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The number of sold homes in July 2010 versus July 2009 was reported to be UP 34% in the Minneapolis / St Paul area with more than 3800 transactions.

The amount of active homes for sale was DOWN 19% to just 24,328 homes.

The number of pending sales (housing sold, but not yet closed) was reported to be UP 43%, with over 4,000 purchase agreements written.

Nationwide, 7% fewer homes entered into the actual foreclosure process, and initial foreclosure notices have fallen 58% since their peak in 2009.

Many times it is hard to interpret all this information, but clearly less homes for sale, less homes going into foreclosure, combined with more actual sales… would lend one to believe the market is slowly starting to crawl forward. It may be more turtle than the hare, but at least it is going in the right direction.

Botton line? If you are thinking of buying a home, now may be the best opportunity to get pre-approved, take advantage of today’s super low mortgage rates, and become a homeowner.

MORTGAGES for SELF-EMPLOYED, and COMMISSIONED INCOME Clients

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MORTGAGES FOR THE SELF-EMPLOYED,   COMMISSIONED, or TIPPED INCOME Clients

Self employed individuals often ask … “Why is it so difficult to qualify for mortgage financing?”

Minneapolis, MN:  Self-employed borrowers, those who work on commission, or those who receive tipped income present one of the most challenging areas of mortgage underwriting. Qualifying self-employed people often requires significant extra time, energy, and patience. A fair and honest pre-qualification requires a special set of Loan Officer skills and expertise.

Long gone are the days when any Loan Officer could give a low doc, no doc, or stated income loan to a self-employed borrower, commission, or tipped income client without any training or special consideration.

Generally speaking, it’s tougher for the self-employed buyer to qualify for a mortgage because it is hard to answer the question: “What is your income?”

What did you earn, what did you write off? Taking advantage of tax laws to reduce income is great for reducing tax liability, but also shows you make less money, making a potential home mortgage loan approval difficult.

Next lenders are looking to see a income history. Is income increasing, decreasing, or stable? This all comes into play for self-employed, commissions, and tipped income home buyers and those same type clients interested in a refinance of their existing home loan.

Today, lenders are back to the old way of providing mortgage loans, and the vast majority of Mortgage Companies, and especially Mortgage Loan Officers are either afraid to work on a self-employed persons home loan, or simply lack the extra knowledge and skill required to get self-employed people a home loan.

Reading, understanding, and qualifying a buyer off of tax returns is not for the weak of heart, or unlicensed bank reps working at a call center.

Self-Employed and Commissioned DOCUMENTS REQUIRED:

Be prepared to send us the following documents. We will be unable to assist you or evaluate you mortgage loan qualifications without them:

  • Last two years personal tax returns (all pages, All schedules)
  • Last two years business returns if employed through a corporation (all pages, all schedules)
  • Current Year-to-Date P&L (Profit and Loss Statement) and Balance Sheet

We will also require the traditional standard home loan approval documents:

OTHER INCOME

  • Copy of most recent two (2) years W-2 statements (for you and any co-borrowers)
  • Copy of pay stubs covering the last (30) thirty days (for you and any co-borrowers)

ASSETS

  • Copy of most recent monthly bank statements (ALL PAGES. If it says “page 1 of 3”, I need all 3 pages no matter what is on them.
  • Copy of most recent statements on 401K, IRA, or Mutual Fund Accounts
  • Copy of most recent brokerage statement for any stocks, bonds or certificates of deposits (or copies of actual certificate)

LESS THAN 2-YEARS SELF-EMPLOYED? YES, it is possible… But it is an exception and NOT easy to get approved. You will need to have worked in the exact same field, with a similar income, and have at least 1-yr of self employed Federal Tax Returns

How to have Real Estate Success in a down market

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Look, there is no magic trick to being a successful Real Estate Agent. Winning agents in a down market don’t make excuses, they make the sales calls they need to make to generate new business. Partnering with a successful and motivated Loan Officer and Lender enhances your success. Watch this motivational clip by Joe Metzler of Cambria Mortgage, St Paul, MN

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Fannie Mae HomePath offers 3.5% in closing costs (temporarily)

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Fannie Mae temporarily offers 3.5% in closing cost incentive to home buyers purchasing a Fannie Mae HomePath eligible foreclosed home.

But wait,  beware of the small print… this is a limited time special incentive offer…. Watch to learn more

Cambria Mortgage is a HomePath Lender in the Minneapolis and St Paul area, and for all of Minnesota and Wisconsin.

Search for HomePath Homes in MN and WI

Thoughts? Log in and post!

Buy New Construction or Existing Homes and Foreclosures?

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St Paul, MN: New construction is suffering.

The lowest NEW housing construction numbers since 1963 when the USA had 120  million LESS people have just been reported. There are many reasons for this, but the fact remains, right now is one of the best times to buy a house, and first time home buyers are missing the boat standing on the sidelines. Builders are fighting back, and we all should be concerned as new construction is a major economic backbone in this country.

Thoughts? We’d love to hear from you. Login and post!

New Rules for First Time Home Buyers

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It is a great time to be a first time home buyer, but some of the rules have changed.  Mortgage interest rates in MN are still amazing, and home prices are super affordable. New mortgage lender and broker rules are making it a little harder to qualify for a home loan, and your costs are going up a little, but don’t let that hold you back. First time home buyers, it’s safe to come out now!

 

HARP – Home Affordable Refinance Program for underwater

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(edit: New guidelines issued 10/24/2011 – Click here for new rules)
HARP, the Home Affordable Refinance Program for underwater homeowners has been extended until June 2012

St Paul, MN: The Home Affordable Refinance Program was set to expire this June 30th, but has been extended one year until June 2012. The extension is great news, as HARP has been about the only success story of all the government programs attempting to stem the tide of foreclosures.

Basically if your existing first mortgage is held by Fannie Mae, or Freddie Mac, and that first mortgage is LESS than 125% of today’s value, you may qualify and be able to take advantage of today’s low rates for refinancing.

To bring even more meat to the grill, Freddie Mac has also announced they WILL NOT add recently announce cost (rate) increases to this program.

Do you qualify for HARP? Check HERE

I want to buy a duplex!

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I want to buy a duplex

I hear this every week. Seems like when it is a buyers market, everyone want to be Donald Trump Jr.

OK, so what is my #1 question? How much do I need for down payment!

Buying a duplex, triplex, or quad isn’t really overly complicated on the mortgage side.  You basically have two options:

1) Are you going to live in one unit?

If yes, then you can potentially get an FHA loan with as little as 3.5% down payment.

2) Is every unit going to be a rental?

If yes, then your down payment options are more expensive. Basically you are going to need 20% down. You can usually get a better interest rates with even bigger down payments.

Of course there are many other factors that come into play. Credit scores are a great example, as is trying to get a mortgage if you already have more than 4 mortgage loans.

While 20% down payment is a lot of money, the investment in rental property at today’s prices should realize you double digit returns…  and that is a LOT better than the banks are giving you to leave it sit in their vault!