2011 – Page 5 – Minnesota Mortgage and Real Estate Daily Blog

Modified Mortgages Ineligible for Refinancing

May 13, 2011 by Joe Metzler

Previously Modified Mortgages Under Attack and maybe Ineligible for Refinancing

St Paul, MN: For many reasons, a lot of home owners have attempted and succeeded in getting their current home mortgage loan modified. Modifications come in many forms, including reduced interest rates, both short and long-term, principal forgiveness, etc.

Modifications, and short-sales, terms never heard of just four years ago, are now commonplace. Lenders have struggled on how to deal with this phenomena in terms of underwriting guidelines for future credit. Short-sales for example, are generally treated by lenders as a foreclosure. While there are some exceptions, those doing short-sales generally have no benefit credit-wise over a true foreclosure.

Now lenders are starting to deal with modified mortgages, and the determination isn’t good for the consumer. While it is still the beginning of a new credit requirement, lenders are starting to refuse to refinance any customer who currently has a modified loan. Research with lenders shows significantly more restrictive guidelines for refinancing mortgages that were previously modified for the purposes of assisting the borrower (defined as “restructured loans” by Fannie Mae and other investors).

Simply put, if you have a “modified” mortgage loan, expect that you may not be eligible to get refinanced in the future!

(Definition: A restructured loan is one in which the terms of the original transaction have been changed, resulting in absolute forgiveness of debt or a restructure of debt through either a modification of the original loan or origination of a new loan that results in one or all of the below:

Forgiveness of a portion of principal and/or interest on either the first or the second mortgage.
Application of a principal curtailment by or on behalf of the investor to simulate principal forgiveness.
Conversion of any portion of the original mortgage debt to a “soft” subordinate mortgage.
Conversion of any portion of the original mortgage debt from secured to unsecured.

Are you a pop tart agent?

May 11, 2011May 11, 2011 by Joe Metzler

Are you a pop tart Real Estate Agent? Do you instantly jump when a new buyer calls? Stop wasting your time, set proper expectations. Is your buyer really pre-approved for a home mortgage loan? Learn more with Joe Metzler and Dave Harvey of Cambria Mortgage, and the MN Real Estate Daily Show.

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Refinancing? Common mistakes to avoid

May 7, 2011 by Joe Metzler

Mortgage Interest Rates are near historic lows. You want to refinance?
Common mistakes, and what NOT To Do

There are a lot of things “not to do”. I will point out only the 3 most common mistakes I see people make.

Setting an unrealistic goal. I always get inquiries from people who say something like, “I have a 30 year fixed rate loan at 5.875% and I will refinance ONLY when rates get to 4.0% with no closing costs”. Sometimes I call people back and say, “Why 4%? why not 3% or 2%? They say, “Well rates are not going to go that low”. Right and they are unlikely to go to 4% with no closing costs also (“no closing cost” loans typically cost anywhere from 1/2% to .75% higher than the going interest rate) You should first succumb to the fact that once you can lower your rate with no out of pocket expense, you should probably refinance. Don’t draw unrealistic interest rate lines in the sand. They get blown away too easily.
The “Once rates start dropping, they are going to continue to drop and I’m smart and I am going to lock when rates hit the bottom of the market” syndrome. It is very hard to guess the interest-rate cycle, and pretty hard to catch the bottom. Remember that rates can rise fairly quickly.
“If the rate goes down just another 1/8th percent, then I’ll lock” This one just kills me! I see people lose all the time over this theory. If your current rate is 5.875% and today’s rate is 4.875%. LOCK & CLOSE! Most people have what I call “interest rate block”. They get a rate stuck in their head, and that is the rate they want, no matter what. Most people fail to realize (and most loan officers fail to show them), that the difference on the average loan over 1/8th a percent is usually less than $15 per month. If you can save $150 per month on your loan at today’s rate, why gamble? Why hold out for another $15 when the odds are against you?

Don’t get piggy. Work with us. Set a goal and lock when it gets there. Are we going to hit the bottom? Probably not. Are we going to save you money? Yes. If you can save money with no out of pocket costs, than you have nothing to lose. If you want to gamble go to Las Vegas. It’s a heck of a lot more fun. Apply Now

Extra Tricks to Save Money When Refinancing

The purpose of most refinance loans is simply to save money. The goal is to minimize your expense over the life of the loan or to minimize your monthly payment in the near future.

If you can swing it, don’t roll every cost of refinancing into your new loan. Most people escrow for taxes and insurance. If you do, your current lender must give you escrow refund within 30 days of paying off their loan. Your new lender, be it us or someone else, must take the equivalent amount of money (or more) at closing to start the new escrow account.

Remember that you always get to skip a month of payments. If you close June 5th, your first new payment is August 1st.

Knowing this, paying some of your closing costs out-of-pocket will save you even more money in the long run. Why roll in $4000 in closing costs, when you really only need to roll in $2000 ($1000 escrow refund + $1000 missed payment = $2000). Paying that $2000 over 30 years doesn’t make sense if you don’t have too.

On the other hand, some people love the fact that they didn’t pay anything out of pocket to refinance, got a nice escrow refund check, then got to miss a mortgage payment. They use the ‘extra’ money to pay bills, go on vacation, etc.

Picking a Lender & Closing Costs

Shopping for a home loan is confusing. No matter what we’re looking for — from cars to refrigerators’ — there’s a built-in element of confusion. Why? Lack of knowledge. An unfortunate rule of thumb is that the less we know about something we need to buy, the more we can expect to pay for it.

Shopping for a mortgage in Minneapolis, St Paul, Duluth, Rochester, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin is complex at best — even for the savvy previous home owner. Daily rate changes, time-sensitive lock-in periods, points, lender’s fees… plus the emotional element of probably the largest financial deal any of us will ever make. Throw in to this already murky stew the ingredients of tricky internet mortgage rate advertising, commissions for every officer, agent and broker who ‘helps’ in your transaction, and the obscure differences between ‘rates’ and ‘fees.’ It’s no mystery that many buyers settle for a home loan that exceeds their monetary means out of sheer exasperation!

Please review our information on closing costs and “BAD Good Faith Estimates“. There is currently a large number of fly-by-night lenders doing some incredibly misleading rate & closing cost advertising. Remember, if it sounds too good, it probably is! Also check out my article “Best Rate or Lowest Cost” for more loan comparison information.

The Bottom Line
Remember, the first rule is that there are no rules. You should refinance if it makes sense for you. Every person & situation is different. What makes sense for one family, may not make sense for you. Call me today to discuss your wants, needs, and goals. Together we’ll determine if refinancing makes sense for YOU.

Click here for more information on the actual loan process.
Click here for 10 Tips to a Smooth Closing
Click here for 10 Mistakes to Avoid

NAR fees are up, and I’m on a budget

May 6, 2011 by Joe Metzler

NAR fees are up, advertising costs are up, real estate sales are down, but as a Real Estate Agent, you need to find more clients, and you need to do it on a budget. Here are a few simple tools to increase your business and make more money from Joe Metzler at Cambria Mortgage, and the Mn Real Estate Daily Show.

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Zero Down Home Loans Are Back

April 29, 2011April 29, 2011 by Joe Metzler

Zero down payment home loans are back. Actually, some of them never went away. VA and USDA Rural Development are two very popular home loan options. Learn more by watching this ROYAL performance… CG LIVE from London!

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IRS Reports First Time Home Buyer Tax Credit Abuse

April 26, 2011April 26, 2011 by Joe Metzler

The IRS says there was significant abuse and fraudulent claims related to the $8000 First Time Home Buyers tax credit. Pretty shocking numbers… $29 Billion dollars given to 4 million people, and the fraud amounted to…

What are your thoughts? Log in an post!

Tough Real Estate Market? What are buyers and sellers supposed to do?

April 26, 2011 by Joe Metzler

The real estate market today is one of the toughest in recent history. A large number of foreclosed homes on the market is marking it tough on the traditional home seller. While every market is different, most areas have seen a significant drop in value.

The mortgage industry has tighten lending, with a virtual elimination of all non-traditional financing and “creative” zero down type options (although VA and USDA are still around and great zero down options). Most programs today require 3.5% to 5% down MINIMUM and good credit. Gone are the days of easy lending.

Washington has tried “fixing” mortgage lending, but has essentially failed with bad programs like FHA Secure, Help For Home Owners, HARP, and HAMP. They’ve made industry changes that have cost home buyers more money, like HVCC, and LO Compensation. They’ve created more confusion with the new three page Good Faith Estimate, and the whopper of them all… Only requiring half of the Loan Officers to have a license!

Traditional sellers have the upper hand and an easier time in most cases in the “condition of the property” category versus a foreclosure, but it is still very tough when the banks are liquidating foreclosed properties, and the prices they are giving some of them away at.

So, what is a seller and buyer to do? How does a seller sell and a buyer buy in today’s market?

First, understand that because of the large volume of foreclosed properties, it is a great time to be a buyer, whether you are a move-up buyer or a first-time buyer.

For sellers, now is not the time to try and sell your own property. You need the help of a FULL-TIME, experienced Realtor to help guide you through the process. Buyers need the same help to guide them through the maze of properties, both traditional and bank-owned. Having a good agent is extremely important. Take some time to interview your Realtor. How long have they been in business? How many sales have they completed? How many buyers have they helped? Can you get references? Don’t just pick your agent from an open house, or use your sisters best friend who got her license last month.

For move-up buyers, you may have to give in to a lower than you like selling price, but you should reap a nice reward on any new home you buy. This is especially true if you are moving from the low $200k to the mid $300k range, as homes that were selling in the $400k range are now in the $350k. Therefore, even if you have to give up a little on your current sale price, you should more than make up for it on the buy side. Remember, a house priced right, and realistic, will sell even in today’s market right away. Furthermore, with today’s standard fixed rates hovering around 5%, you can still lock in historically great rates!

For first-time buyers, it is a great time to find aggressively priced homes, whether it is a bank-owned foreclosure, or a motivated traditional seller. Not all buyers are ready, or want to tackle “AS IS” foreclosures, so be sure to be honest with yourself about what you are doing to avoid a potential disaster down the road.

Today’s prices are again extremely affordable in the first-time buyer starter home category. Even though most zero down programs are no longer available, with proper negotiation, you can get the seller to pay most, if not all of your closing costs.

This means you can buy a $150k home for just $5250 out-of-pocket. With programs like FHA, the entire down payment can be a gift from family members, or community assistance programs. That is how it was always done prior to about 1999… and somehow people bought houses then, so don’t sit back waiting. NOW is the time to buy!

Finally, one of the first things you should do is get pre-approved with a quality lender who will discuss with you your qualifying ability and program options in today’s market. Someone who has the knowledge, expertise, and full range of programs (like FHA) to bring you to a successful no surprises closing. This is never the guy on the internet posting the lowest rate, or the unlicensed bank representative at the 1-800 number bank call center.

A word of caution. If you are shopping for a lender based on rate, be prepared to get screwed. Be sure to read these informative articles for more information: “Rate Shopping – How to do it right“, and “Lender Shopping – How to do it right“.

No matter what your real estate needs are, buying or selling, with the proper guidance of full-time professional Realtor and Loan Officer, you should be able to have your dreams come true.

WOW your sellers with simple internet marketing

April 23, 2011April 22, 2011 by Joe Metzler

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 Cambria Mortgage, St Paul, MN

The credit bureau is selling your info. Here is how to stop it

April 20, 2011 by Joe Metzler

Getting a mortgage loan? Beware of the credit bureau.

You’ve shopped a few lenders, gotten some quotes. You’ve narrowed your search, supplied a full application, and supporting documents. The lender has now pulled your credit report, and informed you everything looks great. You lock your interest rate, and move forward.

Suddenly, you are overwhelmed with telephone calls and an overflowing mail box with offers from competing mortgage companies. What is going on?

Sadly, there is a new and horrible marketing trend called “trigger lists”. Because the lender and pulled your credit (they had to), they triggered an unintended event.

The credit bureaus have found another way to increase their revenue at your expense, and WITHOUT YOUR PERMISSION.

Having credit checked is an important and necessary step in the home buying process, as well as something that is done for many other legitimate reasons. Very few people realize that each time your credit is
checked, an “inquiry” is generated on your personal credit report.

The credit bureau’s are now selling your “inquiry data”, including name, address, phone number (even unlisted), credit score, current debt, debt history, property information, age, gender, and estimated income. They are selling all this personal and confidential information to anyone who writes them a check!

These low life mortgage lenders purchase these leads at a premium price. They then will do, and say anything they can to recoup their investment and turn a hefty profit. Bait and switch tactics are being used to lure clients away from their reputable lender. Many of our clients have even been called by these disreputable lenders and told that the lender they had been speaking to previously “passed on” the information to them!

The good news is you can make it stop immediately. The consumer credit reporting industry has provided a way to “opt out” and remove your name from these lists. You can contact them by phone at
1-888-567-8688 or online at www.optoutprescreen.com.

You certainly have the right to shop for the best professional to meet your lending needs. This should be done on your terms, when and how YOU chose. Unfortunately at this time, these unsolicited marketing tactics are a nuisance and intrusive, but perfectly legal.

Our company, Cambria Mortgage, and my team are doing everything in our power to limit these credit report abuses. We suggest you call your representatives to let them know how you feel too.

Take the time to protect yourself from identity theft and unwanted solicitations. OPT-OUT NOW!

Are No Doc loans still available?

April 22, 2011April 20, 2011 by Joe Metzler

NO Documentation Loans? NINA, SIVA, SISA, STATED Income, No Doc

“NO DOC” loans had been around for years, and served a niche market for the self-employed, commission, and tipped income home owners. Because of their additional risk, they came with higher interest rates, bigger down payments, and generally were only available to self-employed people with a minimum of 2-years provable self-employment history and trouble documenting their true income.

As the home loan markets changed through the early 2000’s, these loans grew in popularity, especially once Wall Street introduced new no doc, stated income, stated assets, no job, and other ridiculous variations with underwriting guidelines so silly almost anyone could qualify for a home loan.

These new variations turned a small niche program into what became commonly known as liar loans. This was because because both customers and Loan Officers were easily allowed to misrepresent the borrowers true circumstances. They were highly abused by consumers, and bad loan officers everywhere, as people realized they could easily get a loan they either should not be getting at all, or more commonly, to get a bigger loan than they normally would have received.

These liar loans were one of the first casualties of the mortgage market meltdown as many of these customers were some of the very first people to end up in foreclosure. Lenders everywhere quickly pulled them from their product lines, and many states now have laws on the books banning them completely.

Unfortunately, the self-employed, commissions, and tipped income people who truly need and benefited from stated income, no documentation (NINA, NIVA, NISA, SISA) type loans are now without loan options. The old saying, one bad apple spoils the whole bunch… In this case, it was a whole bunch of bad apples that spoiled it for the one who really needs it.

If you are looking for a respectable No Documentation loan, you are pretty much out of luck, unless you are:

In a state that still allows them
Have excellent credit
Are in need of under 65% loan-to-value
Are willing to pay huge up-front costs and very high interest rates to “hard money lenders“

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Looking for a “no doc” loan in MN and WI?, Can you still get financing? Maybe, but not without fully documenting your ability to repay your loan.

But, don’t give up just yet. Let a licensed professional loan officer review a full application.

MORTGAGES for SELF-EMPLOYED, and COMMISSIONED INCOME Clients

April 22, 2011April 19, 2011 by Joe Metzler

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

April 23, 2011April 14, 2011 by Joe Metzler

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

April 14, 2011April 13, 2011 by Joe Metzler

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.