What you should know before buying a home in MN or WI

What should I know before buying a home in MN or WI?

Real estate - Home Buying tips in MN and WIHere are some tips that could save you a lot of time, money and trouble.

  • Plan ahead. Establish good credit and save as much as you can for the down payment and closing costs.
  • Get pre-approved online before you start looking. Not only do real estate agents prefer working with pre-qualified buyers; you will have more negotiating power and an edge over homebuyers who are not pre-approved.
  • Get a REALISTIC housing budget and stick to it. Talk to your Loan Officer about debt-to-income ratios
  • Know what you really want in a home. How long will you live there? Is your family growing? What are the schools like? How long is your commute to work? Consider every angle before diving in.
  • Make a reasonable offer. To determine a fair value on the home, ask your real estate agent for a comparative market analysis listing all the sales prices of other houses in the neighborhood.You don’t want to over pay, and you don’t want to waste everyone’s time with unrealistic low ball offers.
  • Choose your Lender carefully. Roughly 80% of Loan Officers are simply unlicensed application clerks.  Only work with a licensed Loan Officer.  TIP: An Loan Officer NMLS # is NOT a license. Ask them if they are licensed or simply registered.  Verify a Loan Officer at www.NMLSConsumerAccess.org.  At the bottown of the page, if one or more state licenses are listed. They have a licensed.  If it says Federal Mortgage Originator, they are NOT licensed.
  • Choose your real estate agent carefully:  A real estate license legally allows someone to practice real estate – it doesn’t mean they are good. Check experience, references, etc.  Also, under NO circumstances should you ever use the homes listing agent as your buying agent.
  • Consult with your lender before paying off debts. You may qualify even with your existing debt, especially if it frees up more cash for a down payment.
  • Save for down payment: While some first time home buyer assistance programs are available, you are much better off, and have many more options if you have your own money for down payment. Try to have at least 3.5% for an FHA loan, but 5% for a conventional loan is much better.
  • Keep your day job. If there is a career move in your future, make the move after your loan is approved. Lenders tend to favor a stable employment history.
  • Do not shift money around. A lender needs to verify all sources of funds. By leaving everything where it is, the process is a lot easier on everyone involved.
  • Do not add to your debt. If you increase your debt by financing a new car, boat, furniture or other large purchase, it could prevent you from qualifying.
  • Timing is everything. If you already own a home, you may need to sell your current home to qualify for a new one. If you are renting, simply time the move to the end of the lease.


Jobs Report Sends Mortgage Rates Jumping

Borrowers faced slightly higher mortgage interest rates this week due to a stronger-than-expected jobs report.

The benchmark 30-year fixed-rate mortgage rose to 4.48 percent from 4.35 percent last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week’s survey had an average total of 0.36 discount and origination points. One year ago, that rate stood at 3.52 percent. Four weeks ago, it was 4.42 percent.

READ THE FULL REPORT from BankRate.com


Minneapolis Refinance activity still low – but should it be?

Since spring of 2013, the number of home owners refinancing to lower interest rates has dropped dramatically, but according to a survey release Tuesday, people who refinanced their home in the third quarter will see about $6 Billion dollars worth of savings over the next year alone that can be used for better things, like paying down credit card or student loan debt – or just to put into savings.

So why are more people not refinancing?

Minnesota mortgage ratesFirst, many people already have… and with 30-year fixed mortgage rates hovering +/- 4.50%, there is little incentive for people to do it because they already have good rates.

The rest appear to not be doing it because they either can’t because of poor credit or other approval hurdles, or they simply think they can’t – but have never tired.

The think they can’t refinance but have never tried group is clearly missing out.

Many who think they can’t, think that because their homes have lost value.  But with programs like HARP (Home Affordable Refinance program), FHA Streamline Refinance Program, and the VA Streamline Program (also knows as an IRRRL Loan), the vast majority of people can.  Never assume you can’t. Pick up the phone or surf over to your local mortgage brokers web site.  It only takes a few minutes to determine if you can refinance, and if you do, what are the savings.

Advantages of refinancing

The obvious big advantage is lowering your monthly mortgage payment.  But there are other significant advantages like paying off other debt, or shortening the term of you loan to pay it off earlier. According to recent reports, an amazing 37% of homeowners shortened the remaining term of their loan.

At the moment, 15-year fixed-rate loans averaged around  a full percentage point below 30-year loans.  That is a big incentive all by itself.  But many people are wanting to go into retirement house payment free, and realize that the low rates on shorter term loans helps them achieve that goal.


Mortgage rates move slightly higher – Week ending 11/7/2013

upFreddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving higher for the first time in three weeks amid more positive economic data out of the manufacturing and non-manufacturing sectors.

News Facts

  • 30-year fixed-rate mortgage rates averaged 4.16 percent with an average 0.8 point for the week ending November 7, 2013, up from last week when it averaged 4.10 percent. A year ago at this time, the 30-year FRM averaged 3.40 percent.
  • 15-year fixed rate mortgages this week averaged 3.27 percent with an average 0.7 point, up from last week when it averaged 3.20 percent. A year ago at this time, the 15-year FRM averaged 2.69 percent.
  • 5-year adjustable-rate mortgage (ARM) averaged 2.96 percent this week with an average 0.5 point, unchanged from last week. A year ago, the 5-year ARM averaged 2.73 percent.

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Fixed mortgage rates rebounded slightly this week on more positive economic data releases. Production in the manufacturing industry expanded for the fifth month in a row in October to the strongest pace since April 2011. Similarly, the non-manufacturing sector grew for the second consecutive month in October and beat the market consensus forecast of a decline. These increases were widespread across the nation, from Minneapolis, to Milwaukee to New York.”


Freddie Mac’s survey is the average of loans bought from lenders  last week, including discount points. Applicants must pay all closing costs at these rates. No cost loan rates higher.

What your Loan Officer DOESN’T tell you can be costly

First Time homebuyersI just got off the phone with a client… She was very happy with me, but extremely pissed at “her” Credit Union.  It’s not that her Credit Union is a bad place, it is just that she isn’t a mortgage professional, and the unlicensed application clerk she had been talking to for a mortgage loan was only selling what the Credit Union offers.

A good mortgage customer

This client banks at a Credit Union.  She wants to buy a home.  She believed the Credit Union would be a great place of get a mortgage loan because “they know her”, and “she is comfortable” with them.  She is a good credit client, has good income, a low debt ratio, and 10% of her own money for down payment.

The Loan Officer told her she didn’t qualify. He said she needed 20% down to get a loan. She left disappointed, but determined to save more money and come back again

Not All Lenders Offer All Mortgage Loans

What the Credit Union Loan Officer told her was true.  She needed 20% down.  What he didn’t tell her, was that was only THEIR guideline.  He failed to mention that she could have gone to a lot of other lenders, who would have been easily able to offer her a loan right away.

As a sales person, the Loan Officer was selling what he had to offer. Was he wrong in not telling her the competitors may have something different?  I’m not sure. But if you go to a VW dealer and ask to see their pickup trucks – which they don’t offer.  Is he going to tell you to go to the Ford dealer? Not likely. He is going to try and sell you a VW.

A second opinion

While most mortgage lenders offer the basic mortgage products, a second opinion, especially if you are dealing with a Bank or Credit Union may be wise. I know of many lenders who do not offer VA Loans, or FHA Loans.  I know many lenders who do not offer USDA Rural Housing Loans, or community down payment assistance programs like the Minnesota Housing Finance Agency loans.

Furthermore, even if a lender does offer a product, that doesn’t mean the Loan Officer is familiar with it, or will mention it.  This is again especially true from banks and credit unions because their Loan Officers do NOT have to be licensed.

Licensed Loan Officers versus Application Clerks

Mortgage lending rules put into place after the real estate crash have many people believing the industry is better than before, and they would be correct.  But there are still major gaps.  The most sickening to me personally is the educational and licensing gap between the various Loan Officers at Banks, Credit Unions, Mortgage Companies, and Mortgage Brokers.

Loan Officers at Banks, Credit Unions, and mortgage companies owned by a Bank or Credit Union DO NOT need to be licensed.  There are no State or Federal testing or educational requirements for depository lender loan officers. Most of these type of Loan Officers are little more than an application clerk.

Loan Officers at non-depository mortgage companies or at mortgage broker companies ARE REQUIRED to have a personal license.  They MUST take mortgage education, they must take State and Federal testing, they must have yearly continuing education, and the must be fully vetted for criminal histories.

Verify your Loan Officer

Verify a Loan Officer has a LicenseAll Loan Officers must have a tracking number. This number must be displayed on paperwork, business cards, web sites, etc.  It is NOT a LICENSE NUMBER.

To verify if a Loan Officer is licensed, or simply an application clerk, go to www.NMLSConsumerAccess.org.  You can then enter the Loan Officers Name or Tracking number to see their information.

Once you have the Loan Officers data in front of you, look towards the bottom.  It will say either State Licenses/Registrations, or just Registration Name.

If one or more states are listed, this Loan Officer has a license.  If you look me up, you’ll see I am licensed in MN and WI.  My tracking number is 274132.

If it says Federal Mortgage Originator, this person is NOT LICENSED.

The Bottom Line

Every Loan Officer can go get a license. There is nothing preventing them from getting one.  It is just that banks and credit unions are not required to have a license. The fact someone doesn’t have a license doesn’t automatically mean they are bad. But in my humble opinion, I am only going to allow a fully licensed and vetted by the Government Loan Officer handle my largest financial transaction.

Who are you using?

By the way, I was able to qualify my customer…  She now had 20%, but we are only using 5% down.

Expect low mortgage rates well into 2014 – Here is why

According to the latest weekly Freddie Mac Rate Report,  the average rates for a 30-year fixed-rate mortgages hit the lowest levels seen since June last week after the Federal Reserve stated they will not taper their $85 billion per month mortgage bond purchase program anytime soon.

Until the Federal Reserve does start to taper, and then stop buying bonds,  expect to see low mortgage rates for some time to come. We’re going to be enjoying some very attractive interest rates well into 2014. The question is, is it going to be a 3.875% interest rate or a 4.25% interest rate? Either way, historically speaking, these are still great mortgage rates. People should be taking advantage with a new home purchase, or refinancing their existing mortgage loan.

Minneapolis Low Mortgage RatesThe general market still widely believes that the Federal Reserve won’t begin talk of tapering their massive bond purchases until at least June of 2014. Keep in mind that Congress just kicked the budget ceiling down the road until February,  where they are going to have to renegotiate again, so the Federal Reserve will also have to react to that budget battle too.  If  Congress comes up with a good long-term agreement, mortgage rates should move up, but we still anticipate under 5%.

Low mortgage rates well into 2014.

Really, there’s no way to know until February.  Until then, mortgage-backed securities are operating at a very thin range.  Low mortgage rates are here today. Better interest rates, over and above what we’re seeing right now, are remote. On the other hand, worse rates than what we’re seeing right now are remote too.

With current mortgage rates for FHA loans in the upper 3% range, and Fannie and Freddie loans in the low 4% range, there really isn’t any room to lower rates further to spur the housing markets.  What the county needs is jobs, and stable jobs.  When people feel good about their financial situation, they have no fear buying homes.