Home ownership IS cheaper than Renting

Owning is cheaper than renting

Minneapolis, MN:  The debate continues.  Is owning a home more affordable than renting.  New data is in showing that for most people, yes, owning appears to be cheaper than renting.

A survey by the big online company that starts with a Z and rhymes with Willow (I’m not a fan, so I don’t like to use their name) found on average, Americans spend about 15% of their income on a home mortgage loan, while renters that live in the nation’s largest cities spend around  30% of their income on just their rent.

Conventional wisdom says housing debt of 30% of your income or less is deemed affordable.

The report also looked at other issues effecting homeownership, and found that, just like in the past, coming up with down payment is a challenge for many, and that 13% of home buyers in 2014 got their down payment as a gift from relatives.

Many people are not aware that most home buyers DO NOT need a 20% down payment.  Conventional loan programs allow for as little as 3% down payment, and the popular FHA home loan only requires 3.5% down payment. If you are US Military, a VA loan is a no down payment loan. If you are looking to buy in rural areas of the country, the USDA Rural Development loan is also a no down payment loan.

Only if you live in a “high cost” are of the county where even the most modest home costs over $417,000 will you maybe need a larger down payment.

Many areas and potential home buyers also qualify for First Time Home Buyer programs, like the Minnesota Housing Finance Agency Start Up program, here in Minnesota where I am, that will typically loan the new homeowner a big chunk of their down payment money. The program here only requires the buyer to have $1,000 of their own money to buy a home.

Sadly, many renters THINK they can’t afford a home, when statistics tend to prove otherwise. Between small down payment requirements, gifts from relatives, down payment assistance programs, and even taking money from your 401k program for down payment, most people CAN make home ownership work.

Another challenge is debt.  Many talk about student loan debt killing home buying for millennials.  As a Loan Officer, I simply don’t see it.  What I DO see is first time home buyers needing to get back to reality in their home purchase. The term starter home needs to return to the lexicon of home buyers.

Your first home needs to fit into the reality of your income and debts. Therefore, your first home may not be your dream home.

Credit is the final challenge.  If you pay your bills on time, you should be just fine.  If you don’t, you need to get that corrected first. Realistically, you need to have a middle credit score of 620 or higher. If you have poor credit, you will need to work on improving your credit first. There are NO bad credit loans available.

 

ARE YOU READY TO BECOME A HOMEOWNER

All mortgage loan applicants need to meet some basic requirements:

– OK or better credit history.
– Stable employment
– Buy a home you can safely afford (known as debt ratios)
– Have some money in the bank

If you are realy, contact a local mortgage broker in your area.  Give them a complete mortgage application, and let them zero in on what programs you qualify for, how much house you can afford, what the payments will look like, and how much money you will need to pull it all together.

If it all looks good, you’ll be put in contact with a local expert Real Estate Agent, who will help you select that perfect home.


How Real Estate Agents Risk their License everyday

Don’t risk your Real Estate License

Many Real Estate Agents put their license at risk on a daily basis without knowing it.  Generally this is by stepping outside of their official duties, and stepping into areas they shouldn’t.

Title Company Risk

Did you know that most states have insurance solicitation laws that may apply when you refer a client to an in-house title firm (or one with which you have a Marketing Service Agreement)?

That means that you might need a title insurance license to make certain referrals. The safest thing a real estate agent can do is to discuss title, what it is, and let their clients decide who to use.images1923532412

This includes real estate agents automatically ordering title services from their preferred title company without talking to clients and getting their permission.

Mortgage Risk

Did you know that mortgage laws also prevent non-licensed mortgage originators from discussing loans, loan terms, programs and interest rates?  A Mortgage Loan Originator License must be obtained BEFORE doing any of the following residential property mortgage loan activities: soliciting, originating a loan application, offering, or negotiating any residential mortgage loans.

Can are real estate agent refer a client to a lender or Loan officer?  You bet, but they need to be very careful if they suggest loan programs, or talk about interest rates. A real estate agents best bet is to simply tell the client that they are not a lender, and they need to ask the Loan Officer all mortgage questions.

CFPB (Consumer Financial Protection Bureau)

“Solicit” means attempting to sell or asking or urging a person to apply for a particular kind of insurance or loan from a particular company, and no person shall sell, solicit, or negotiate any insurance or mortgage without a license.

Regulators at the CFPB are turning their heads towards Real Estate Agents, now that they have caused a lot of headache in the banking, mortgage, and credit card industries.  Just like giving legal advice,  it is generally best for real estate agents to simply avoid the potential trouble, and think before you act, even if your heart is in the right place by not giving advice and referrals.


Is it OK to make a lowball offer?

welcome2_FTHB_1

Minneapolis, MN:  The spring real estate market is is upon us. The past few years have been tough in the real estate market, but like a roller-coaster, the market has plenty of ups and downs.  So where is the market today?  Can you make a lowball offer anymore?

As a general rule of thumb, it’s a bad idea for potential home buyers to make a low offer in the spring market, as multiple offers and increased sales activity mean sellers are more confident in rejecting your offer. In some cases, though, you might still be able to get away with making a low offer, depending on the specifics in your area and the home you’re considering.

Remember – all real estate is local.   In the Minneapolis / St Paul area, good inventory is low. Any home priced under $200,000 in good condition is going fast with multiple offers.

Local Sales Activity:  If sales activity in your region is low, you may be able to make a low offer on a home and actually have it accepted. The real estate market is in recovery phase in much of the country, but in some places, houses are still staying on the market for a long time, and sellers may be more willing to take a low offer in order to move the home. Your real estate agent can advise you on sales activity in your region. Are homes selling? How long are they on the market? Low activity may support a lower offer.

Inventory:  Inventory is a huge factor in whether you can get away with making a low offer. If there’s a surplus of inventory in your region, homes will sit on the market significantly longer, and sellers may be willing to entertain lower offers. If inventory is scarce or in high demand, though, sellers are probably getting multiple offers, so your low offer is likely to quickly be rejected.

neg_termPrices:  If homes are selling in your region, at what price point are they selling? It’s possible for a real estate market to be brisk, but a home that’s priced higher may sit on the market for months while the homes around it sell quickly. Evaluate the prices at which homes are selling, and if you’re willing to take a risk, make an offer on the home that is comparable to other sales. This is more likely to be successful if a seller had originally priced a home high to begin with.

Mortgage rates:   With current mortgage rates hovering at history lows, more people are able to afford homes, hence more people are in the market.  More people, more competition.

Phychological Warfare:  We all feel the need to “win”.  You want to win with your lower price, and the seller wants to win with their higher price. Don’t let emotions and personality interfere.

Also consider overall payment before being stubborn causes you to lose your dream house. At a  3.50% interest rate, $5000 more in purchase price is just $22.50 more a month.  Talked to your Loan Officer, or review the overall mortgage payment with a mortgage payment calculator.


Top two myths about Real Estate Agents

With millions of web sites to look at for home for sale listing, it is becoming more and more common for people to feel they don’t need the help of a licensed Real Estate Agent.

More specifically, people seem to ONLY be calling listing agents for the properties you want to see. The thought behind this I suppose is “I can get a better deal if I don’t involve another agent and contact the listing agent directly.”

While the listing agent loves you only calling them, here is why is is usually a costly mistake for home buyers.

Myth # 1- I will get a better deal if I call the listing agent directly.

That listing agent is contractually bound to do what is in the best interest of the seller, and that means getting the highest dollar amount for the sale of the home. NEVER disclose your top dollar or financial ability to get a bigger mortgage loan to them because by law they have to go back to the seller with this information.

Remember…your goal is to pay as little as possible, while the seller’s agent’s goal is to get as much as possible for the seller. No matter what a Real Estate agent claims, this is a clear conflict of interest.

Myth # 2- I can find more homes for sale by calling more than one agent, or looking at multiple web sites.

The days of each real estate office having big books of only their companies listing are long gone. It is mutually beneficial for all Real Estate Agents to have all properties in the same database (call the MLS – or Multiple Listing Service)

All Real Estate Agents in the same area therefore pull the same list of homes available  for sale from the same multiple listing service database. Local agent sites typically interface with the local MLS site a minimum of once per day. If a new house for sale gets added today, EVERYONE local should have it listed tomorrow.

If you saw a home on Zillow, or some other national site, but that particular home didn’t come up in the local agent’s site, remember sites like Zillow & Trulia are NOT updated as often as the local MLS database real estate agents can pull from are. If it is not on the local MLS…  chances are the house that you saw has already been sold or is already under contract.

More importantly, the opposite is more often true. You find a home on a local real estate web site but NOT on the national sites. This is because some local companies do NOT report to the national systems. In my area (Minneapolis / St Paul, MN), the biggest player in the market (Edina Realty) recently stated they will no longer let their listing be show on the big national sites.  This means if you are looking at home for sale here, but on a national site versus a local site, you a NOT seeing over 20% of this areas listing!

The bottom line is the smart move for home buyers, and especially first time home buyers in MN and WI, is to use the services of a good, licensed local real estate agent in any home purchase transaction, and save yourself a lot of time by only looking at one LOCAL REALTOR web site.


WOW your sellers with simple internet marketing

WOW your sellers with Internet Marketing.

As an agent, you can sell homes. The number 1 issue most Realtors face is
finding the next client.  So now you’ve gotten a listing, but are your
clients saying WOW and referring you to others? Today, it is simple to WOW a
seller with free, or close to free internet marketing of their home.  Learn
how with this short video from
Joe Metzler of Mortgages Unlimited, St Paul, MN


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

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!