...

Mortgage

Are you being pressured by your Realtor to use “their” lender?

by

Are you being pressured by your Realtor to use “their” lender?

Minneapolis, MN: When buying a home, unless you have cash, you are going to need financing! As a consumer, you have the right to pick whatever lender you decide is best for you. You will likely also receive all sorts of lender suggestions from those around you, and maybe even high pressure to use specific lenders.

My take on the state of the industry and why you are being pressured to use a specific lender follows one of three scenarios:

  • You have a competent real estate agent who is concerned about the transaction closing. If they have never worked with the lender you plan on using, they are naturally concerned about that lender’s ability to perform. More often than not, this is an unfounded in fact fear, perpetuated from hard to close sub-prime loans that long ago disappeared from the market. More often than not, simply having your lender and Real Estate Agent talk to each other will address the Real Estate agent’s concerns. If they are both competent professionals, they’ll recognize that in each other and problem solved.
  • Most real estate agent today work at a company that has their own lender. The agent is under enormous pressure from management to refer all buyers to the in-house lender.  Why is that? Because most of the profit from the real estate operation accrues from the in-house mortgage and title company operation, and not from the real estate side.  You will almost always find that the rates offered by the in-house mortgage lender are higher than what you could find from other lenders. The in-house lender knows the statistical evidence that 75% of home buyers accept the first rate offered to them and set their profit margin accordingly. If the lender your agent is recommending is offering you higher rates than another lenders you judge to be competent you now know why their rates are higher – they are responsible for producing excess profit for the parent organization.  Your choice whether you want to pay for that excess profit or not.
  • The agent is getting an under the table kick back from the lender – yes illegal, and unfortunately, yes it continues to occur. The specific agent themselves is getting a monetary kickback, their advertising paid for, or some other form of payment by the lender or specific loan officer. While very rare, it does happen.

If the rates offered by the recommended lender are higher, it is pretty simple – you are not getting the best deal in the market. You are paying for someone’s additional profit. That “someone” could be the big bank name as their rates are higher to pay for all of their fixed overhead and advertising. It could be the real estate company that depends upon extra mortgage affiliate profit to pay the commission splits they are offering to real estate agents, or something else.

Most buyers focus on the monthly payment difference between rates and end up thinking something like, “the agent wants me to use this specific lender and the monthly payment is only $15 dollars more, so who cares”.   What you’re missing is the present economic value difference that an .125% or .25% higher rate means in dollars today.

What I mean by that – if the recommended lender is offering you a 5.00% rate and other qualified and competent lenders tell you they can off you a 4.75% rate, the important number is not the $15 or $30 per month difference. The important number comes from asking the 4.75% rate lender, “What is the dollar amount of the lender closing cost credit you will give me if I do the loan with you at 5.00%?”  Another way to look at it is this, at 4.75%, maybe your closing costs are $6,000, but at 5.00%, your closing costs are only $4,000.

That is the dollar amount that could have been in your pocket, but if you give in to the pressure, and instead transfers to someone else’s pocket. When you are getting that level of pressure, someone has a vested interest in who you obtain your mortgage through.

Bottom line: Talk to the Realtor’s suggested preferred lender if you want, but be sure to talk to one or two other lenders, then YOU CHOOSE who YOU WANT.


 

(C) 2011 – Joe Metzler – Mortgages Unlimited, St Paul, MN #274132. Re-blog but do not steal!

We lend in MN and WI ONLY. Searching rates on home loans, rates for refinancing your mortgage in MN or WI. We have some of the best rates on home loans!

Grow Your Real Estate Business for Free if you know the secret

by

MN Real Estate Agents, Are you closing deals, making money, and growing your business, or are you killing your future business.

Learn how to grow your business with the right attitude and the right mortgage lending partners.

New Rules for First Time Home Buyers

by

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!

 

I want to buy a duplex!

by

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!

No Closing Cost Mortgage Refinance? Good or Bad?

by

No Closing Cost Mortgage Refinance? BUYER BEWARE?
Good or Bad Idea? YOU DECIDE after reading thisJoe Metzler, MMS - (651) 552-3681…

St Paul, MN: Mortgage interest rates are currently at historic lows. Your mailbox and the airwaves have become full with mortgage companies competing for your business. Many of these advertisements are for “No Cost” or “No Lender Fee” loans.

Are No Cost Loans a Deal? For most people, usually not.

One of the most confusing areas for consumers in a mortgage loan transaction are closing costs. Here I’ll explain the advantages and disadvantages of the highly advertised “no closing cost” or “low cost “loans.

First and foremost, there is no such thing as a NO Closing Cost Loan! Everyone knows there are costs associated with getting a mortgage loan; appraisal, credit reports, state taxes, county recording fees, title companies fees, lender fees, escrows, and more. Someone has to pay these fees, and it is always YOU. How you pay them is what this article tries to explain.

Homeowners in Minneapolis, St Paul, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin need to understand that in a no lender fee or no closing cost mortgage loan, the lender simply uses “negative” points to offset your costs. In the example below, by having the 5.00% rate (versus the 4.5% rate), you can reduce (or offset through interest rate) $5,000 of closing costs. By choosing this option, it appear as if you saved thousands in closing costs. GREAT! But while lower costs always sounds good, you now have a significantly higher interest rate! OK, now what?

No matter what anyone says, a zero cost, or no lender fee loan is NOT automatically a great deal. Although it may sound so much better than adding thousands in closing fees to your principal balance, you have to analyze each individual loan and client situation to determine the benefits. Many lenders speak highly of the “thousands of dollars” you save in fees. They never discuss the fact that you may spend significantly more in interest over the full life of the loan than you ever saved in up-front closing costs! In the example below, you can pay $12,578 MORE for your no cost loan!

FACT: In a refinance loan, the vast majority of people roll the closing costs into the new loan.

View the following chart, then call us. We’ll run your personal numbers. Then you can decide if a no closing cost home loan is right or wrong for you.

Deal or No Deal? Most Common /
NORMAL		 OK short-term
BAD long-term
Most CommonLow Cost Option		 OK short-term
Very BAD long-term
Loan Amount $205,000 $203,000 $200,000
Interest Rate 4.50% 4.75% 5.00%
Principal & Interest Payment $1,038 (+$20) $1,058 (+ $45) $1,073 (+$60)
Closing Costs On Estimate $5,000 $3,000 $0
Out of Pocket Closing Cost Paid $0 – all rolled in loan $0. $2k in rate, $3k in loan $0. $5k in rate
Interest Paid over 5 years $48,192 $50,271 $52,054
Interest Paid over 15 years $121,743 $127,744 $133,002
Interest Paid over 30 years $172,932 ($373,935) $182,215 $190,491 ($386,513)

OK, so you are looking at the math, and maybe say “this isn’t so bad”, especially if you are in the home under 5-years.

But wait, here is a giant “Gotcha”

ANY LENDER who sells the no cost mortgage simultaneously sells a client into becoming a “serial refinancer,” which is not looking out for the client. They are “churning” the client and raking in fees year after year by fooling you into refinancing constantly at “no cost”, but always moving you BACKWARDS into a new 30-year loan. How many times have YOU gone backwards?

Factor in the monthly payments on all those additional “backward years” on all those “no cost” refinances, and that “biggest no brainer in history” no closing cost loan has actually cost you dearly.

Churning of home owner mortgages is illegal in most states

I hope this article has helped you to understand the varied measures used to determine the advantages and disadvantages of zero cost loans. Each borrower is different, and the evaluations must be made on a case-by-case basis. As you can see, there are many factors to consider when looking at the available options. With us as your personal Mortgage Consultants, we will be able to answer all of your questions, outline the costs and benefits, and even give you a few new ones to consider!

While everyone’s individual financial situation varies, let us show you the math so you make the correct choice. Of course, if a zero cost loan makes sense for your case, we will be happy to do one for you.

City Living Home Loan Program – Minneapolis and St Paul.

by

Learn all about The City Living Program in Minneapolis and Saint Paul. River walks, people, fine dining and concerts. And that’s just the beginning.

From condos and lofts in downtown to charming homes in historic residential neighborhoods, the Twin Cities area has much in the way of housing options that allow you to enjoy all that major cities have to offer.

With City Livings loan programs, the reality of urban living and home ownership is not far away. Home buyers accessing this First Time Home buyer Loan may qualify for a below market interest rate may also be eligible for Down payment and Closing Cost Assistance. As a borrower, you can choose from two market mortgage interest rates; one rate comes with a Down Payment Assistance Grant (DPA) of either 2% of your new homes purchase price, while the other rate is without the grant (Non-DPA).

This program is made available by the cities of Saint Paul and Minneapolis, and is available for homes within the Minneapolis and St Paul City limits.

General Program Information and Qualifications

  1. You must live in the home.
  2. Property must be single family home, or duplex in Saint Paul or Minneapolis city limits.
  3. Income and purchase price limits apply.
  4. Home Buyer counseling class is required. (call 651-552-3681 to register)
  5. First Time home buyer funds are reserved on a first-come, first-serve basis First Time Home Buyer money NOW AVAILABLE.

Apply online and be ready to go!