Buying a Condo and need financing, beware of some extra steps

Many buyers in the Minneapolis St Paul, along with Duluth, Rochester, and throughout all of MN qualify for FHA financing. FHA is the government backed loan program that allows for just 3.5% down payment. With the changes in the mortgage industry, if you are buying a CONDO, there are extra step and rules you need to be aware of.

When buying a home, lenders approve the buyer, and approve the home. When buying a town home or condo, lenders also have to approve the Association.

Without bothering you with the details, the purpose of this post is to simply make you aware of the extra approval process, and to let you know this additional step can potentially cause a loan denial, but usually just involves a much longer loan approval process.

Everyone using FHA financing to buy a condo should check to see if the condo project is on the FHA-approved (HUD-approved) list. This is an absolute must-read for you! If you want an FHA loan, you can only buy in condo projects that are approved by HUD (the Department of Housing and Urban Development).

HUD has recently made available online a list of the condo projects that are already approved. Before I show you how to access the list, know two things:

(1) If a condo project is on the list, it must still be checked by your lender to make sure it still meets HUD’s requirements (for owner/occupancy ratios, etc.)

(2) If a condo project is not on the list, your lender needs to go through a long process to get it approved. This potentially could delay your closing, or even result in a loan denial if the condo project isn’t ultimately approved. At the least, you should check to see if the project is approved before making any offer on a condo, then ask questions as to why it is not approved.

Condo’s in unapproved projects typically are offered at below market prices because of the inability to get financing. Many of these units are only able to be bought with cash.

Here’s how you check FHA approved Condo list:

(1) Go to HUD’s website at this link: https://entp.hud.gov/idapp/html/condlook.cfm.

(2) Fill in the blanks as they pertain to your condo search, and click the ‘send’ button at the bottom of the screen.

Finally, understand with the additional burden on FHA condo financing, you need to make sure you are working with an NMLS Licensed Loan Officer who understand the additional complexities to make your purchase smooth and stress free.

New Appraisal Rules starting in Sept 2011

Appraisals are changing again.

Fannie Mae and and Freddie Mae have decided to change the way appraisers describe the quality and condition of homes.

Appraisers have always described properties as being: Good, Average, Fair or Poor – sometimes adding “very good” or “excellent” or fudging with “low-average” or “average-” – knowing that a lower condition or quality review of the home as fair or poor – you probably killed the deal.

Going forward, appraisers will need to define condition on a C1 – to – C6 scale and quality on a Q1 to Q6 scale.  1 is considered the best – for condition a new or unlived in dwelling.  A C6 condition is a property with substantial damage or other major maintenance issues.

For views, appraisers will need to use the following codes: A, B or N — what do they mean: A = adverse (hurts value or marketability); B = Beneficial (that’s good) and N = Neutral.  and if it is a view lot – how about B;MTn;Wtr — what?  Are you confused yet?

Now if you have 2 and 1/2 baths the correct way to show the count will be 2.1 and if the house has 2 1/2 baths = 2.2

For Kitchens and baths we will need to report if they have been “updated” “not updated” or “remodeled” and if the work was done in less than 1-year; 1-5 years, 6-10 years, 11-15 years ago or unknown.  An updated bath might have a new toilet, and remodeled bath an all new shower.

The change is designed to give more specific information. By using numbers, and not wiggle words like “average”, will help in underwriting loans.

The worse news is, homes rated Q5 and Q6 will NOT be allowed to be sold on the secondary market.  So if an appraisal comes back as a Q5 or Q6 (something few of us will know in advance), the loan likely will be denied by your lender.



Technology for Realtors – Are you being left behind?

Are you an old dinosaur Realtor, or do you use all of today’s advanced technology? Watch today’s video, then get you own free gift of technology for your iPhone, Blackberry, or Android phone from Joe Metzler at Cambria Mortgage.

Refinance your upside down mortgage while rates are low

Just when you considered housing loan rates could not go down anymore, they have strike record low levels once again this week, and every homeowner should take other look at their stream situation.

Homeowners refinance for many not similar reasons. Some wish to lower their payments. Some wish to shorten the life of their mortgage. Some wish to obtain some cash out. Some wish to pay off a Home Equity Line of Credit.

There are still great mortgage programs available in today’s market. One of those allows homeowners who have lost value to still refinance in to a descend rate. Freddie Mac and Fannie Mae have allow homeowners to refinance, even if they owe up to 125 percent of the appraised value of their home. It is estimated that more than 25 percent of homeowners in the U.S. owe more than their home is worth.

However, only Freddie Mac and Fannie Mae allow for the 125 percent limit, many banks and housing loan companies only enable homeowners to refinance if they owe up to or reduction than 105 percent of the value of their home (including us). Of course, all your standard other requirements still apply (debt-to-income ratios, credit scores, etc).

Click here to see who really holds your loan (it usually isn’t who you make payment to).

Homeowners who have a second mortgage can also refinance, but no cash is allowed.

There are many factors to ponder if a refinance makes sense. One is closing costs. Many people take a NO COST loan, but we suggest you not agree to a “no cost” loan unless you entirely comprehend the differences between a standard “cost” loan and the “no cost” loan. Neither option is right or wrong, but you can pay dearly for selecting the wrong one for your individual situation.

Average closing costs by state

I’m not a big fan of this chart, but it shows the "average" closing costs by
state, and where each state ranks. My issue with the chart comes from multiple
front…  Regardless… take a peek.

Mortgage Market Guide – Closing Costs by State

The map and table are based on data from Bankrate. They rank the states from
most expensive closing costs to least expensive*. Bankrate surveyed one city in
49 states, two cities in California — Los Angeles and San Francisco — and the
District of Columbia.


Home sales UP 34% over 2010

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.

Credit Repair Companies. Good or Bad Idea?

Credit Repair Companies. Good or Bad Idea?

St Paul, MN: There are a lot of credit repair firms and credit counselors that have not acted in the best interest of their clients and this has certainly given the business a bad name. But that does not mean that the basic concept is not good. As a matter of fact–improving credit scores is even more important in today’s market. With the current credit crunch, expect a much harder time getting mortgage loan approval with weak credit.

Freddie Mac and Fannie Mae has implemented interest rate adjustments for anyone under 740 credit score. The mortgage insurance companies are adjusting their rates and refusing to supply mortgage insurance to anyone with a score lower than around 660. FHA, technically says they will allow a score as low as 580, you’ll have a very difficult time finding a mortgage loan approval with less than a 640 credit score.

The national average credit score is around 680. Approximately 10 million people may get a new mortgage this year, but 80 million others have credit problems and can’t get a mortgage that will help them achieve their dreams.

Self Help May Be Best

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

1) “Credit problems? No problem!”

2) “We can erase your bad credit – 100% guaranteed.”

3) “Create a new credit identity – legally.”

4) “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

Do yourself a favor and save some money, too. Don’t believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

The Scam

Everyday, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they usually can’t deliver. After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report; most simply vanish with your money.

The Warning Signs

If you decide to respond to a credit repair offer, look for these tell-tale signs of a scam:

1) companies that want you to pay for credit repair services before they provide any services.

2) companies that do not tell you your legal rights and what you can do for yourself for free.

3) companies that recommend that you not contact a credit reporting company directly.

4) companies that suggest that you try to invent a “new” credit identity – and then, a new credit report – by applying for an Employer Identification Number to use instead of your Social Security number.

5) companies that advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.

The Truth

No one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act (FCRA):

1) You’re entitled to a free report if a company takes adverse action against you, like denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.

2) Each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – is required to provide you with a free copy of your credit report, at your request, once every 12 months. The three companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report.

To order, click on annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print the form from ftc.gov/bcp/conline/edcams/credit/ .

Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order your report from each of the companies one at a time. For more information, see Your Access to Free Credit Reports at ftc.gov/bcp/conline/edcams/credit/ .

Otherwise, a consumer reporting company may charge you up to $9.50 for another copy of your report within a 12-month period.

3) You can dispute mistakes or outdated items for free. Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.

Reliable Companies?

Do they exist? You bet… there are many good companies to choose from. As with just about anything else, be sure to do your homework before selecting a company. Check them out with the Better Business Bureau, make sure the give you their Client Bill of Rights for your review, and make sure they offer a free, no obligation, confidential credit and debt analysis WITH NO PRESSURE before handing over a penny of your hard earned money!

So this is what hope and change look like?

Head for Camp David. Convene meetings. Take advice from economists, your Cabinet, all the experts. Then put forward a giant new economic program, maybe including some dramatic form of shock therapy that will calm financial markets and create jobs.

That’s the kind of response Americans are used to seeing in a president when the nation is suddenly confronted with bad news like last week’s market turmoil and the U.S. credit downgrade by Standard & Poor’s. But the results of such a response to economic alarm 40 Augusts ago suggest this isn’t the way to go.




Float or Lock a Mortgage Interest Rate?

Mortgage interest rates — just like stock prices — change price daily and you can win big or lose big if you don’t know what you are doing.

Everyday Loan Officers are ask “what do you think interest rates are going to do?” Of course none of us know that answer, so except for the most extreme cases on a purchase transaction, I suggest you always lock, and to do it as soon as you can. The sooner you lock your rate, the less chance you have of losing in the mortgage interest rate game

If you have a signed purchase contract in hand, lock your rate as soon as possible. There is no better way to protect yourself from the fickle mortgage markets. Holding out for 1/8th – 1/4% more is just not worth the risk! If you want to gamble… go to Vegas.

With interest rates currently hovering near historic lows, the chance of any meaningful rate drop is low. The chance of rates going higher is very big.

It is better to win and lock on a known great rate, and be slightly annoyed if interest rates go down a little before closing, than to be floating and lose with rates dramatically higher before closing.

One other aspect… You have so many other things to do during the buying process than to keep stressing yourself out by looking at mortgage interest rates all day. Just lock and be done!

A refinance transaction on the other hand is different. The new refinance rate has to make sense to act. According to a recent survey, most people refinance when the difference between their current rate and any new rate is at least 1% or greater. You can potentially gamble a bit more because you are not under any time restraints, but if today’s refinance rate is close, take it and run.

Finally, we always suggest monitoring one of the interest rate advisory sites for good daily interest rate float or lock advice.

25% Equity Rule to Refi?

A proposal put forward by federal regulators to define “safe” mortgages would raise refinancing costs for half the nation’s homeowners with home loans, a coalition of industry and other advocacy groups has said.

The Coalition for Sensible Housing Policy says that 25 million homeowners could be affected by a rule that would effectively require borrowers to have at least 25 percent equity in their homes to qualify for the best terms when refinancing a mortgage. The number amounts to more than half of U.S. homeowners who currently have a mortgage.

Most Refinances are “Rate and term” only

“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 50 years to lock in interest savings,” said Nothaft. “Over the first half of 2011, fixed-rate mortgage rates hit a low during June, with 30-year product averaging 4.50 percent and 15-year averaging 3.68 percent over the last four weeks of June

Freddie Mac has released the results of its second quarter refinance analysis showing homeowners who refinance continue to strengthen their fiscal house. The analysis shows that 77 percent of homeowners who have refinanced have been able to maintain or reduce their mortgage debt in second quarter of 2011.