First Step for a First Time Home Buyer

First Step for a First Time Home Buyer

Minneapolis, MN:  Congratulations, you’ve decided that you would like to own you own home.  As a first time home buyer, what should be your first step to home ownership?

Consult a Local Mortgage Loan Officer

real1The vast majority of people, in my opinion, start the process wrong, by talking to a real estate agent first. Without fail, the number one step to home ownership is to talk to a local mortgage company Loan officer.  Why?  Simple. How else do you know what you can afford, what mortgage programs are available to you, or how much cash you’ll need to pull it all together otherwise?

When talking to a real estate agent first, you are already off on the wrong foot.  A real estate agent job is to find you the right house… But without knowing what you can afford, how can they show you anything?  Any good real estate agent knowing you are not already pre-approved by a lender is simply going to refer you to a Loan Officer to figure out your financing.  You might as well go there first.

Many people think they will be approved, and have an idea of what they can afford – and most of the time they are correct.  Sadly, a lot of them who think they can be approved, simply can not.  Another misconception is that if you have an OK credit score, that you will be approved.  Credit scores are a great start, but credit scores alone do not make for a loan approval.

What Mortgage Company to Choose?

The mortgage company you choose equals about 20% of the success in getting a home loan,  The Loan Officer you choose equals the other 80% of the success. For the most part, almost all mortgage companies offer the same basic loan programs.  Conventional loans, FHA Loans, VA Loans, USDA Rural Housing Loans, first time home buyer, and down payment assistance programs.  Furthermore, all mortgage companies have essentially the exact same closing costs and interest rates.  So shopping around based on those parameters doesn’t get you too far.

Your Loan Officer on the other hand is essentially the primary figure and nucleus of the entire transaction.  Their knowledge and expertise in loan programs, underwriting guidelines, and communication skills between all parties can not be overstated.  Your Loan officer works with everyone, from you the buyer, to both the selling agent, your buying agent, processors, underwriting, title company, appraiser, and more. Having a new, weak, unlicensed, or inexperienced Loan officer can cause all sorts of problems.

Licensed versus Unlicensed Loan Officer

Most people don’t even realize there is a difference, yet a whopping 80% of Loan Officers are NOT licensed. Clearly if most people knew there was a difference, they would only work with a licensed loan officer. Licensed loan officers need to have successfully completed mortgage education, passed stringent Federal and State testing, completed criminal background checks, and are required to attend continuing education classes each year. Non-licensed, but simply registered loan officers do not need to do any of those items.mtg_license

Verify a Loan Officer is Licensed

Luckily, there is a national database where you can check to see if the person you are working with is simply registered, or fully licensed.  Go to www.NLMSConsumerAccess.org. Type in the Loan Officers name or registration number (NMLS number).

Once there, look at the bottom of the page.  If is says State Licenses/Registration and lists one or more states, this person IS Licensed.  If it says Federal Registration, then Federal Mortgage Loan Originator, this person is NOT Licensed

4 tips for first time home buyers

4 tips for First Time Home Buyers in MN

Minneapolis, MN:  First Time Home Buyers don’t know what they don’t know… so they end up anxiously asking all of their family, friends, and the Realtor for financial advice.  Because none of these people are Mortgage Loan Officers, they end up just hearing horror stories, and getting incorrect information, adding to their anxiety.

Start Here:

Take a Peak at your Credit Report as early as possible.

qualifyYour Credit is more important than having enough cash, or getting the best mortgage rate. Your credit rating, or LACK of credit rating will be the single determining factor for when MANY people can buy a home. Minimum Credit Score Requirements for a Mortgage will vary based upon the mortgage program you are applying for. You will read all sorts of information about credit scores on the internet, but the reality is that is your middle credit score is BELOW 620, you are not ready to buy a home..

Have some down payment money.

You may read and hear about down payment assistance programs and other first time home buyer programs. Most of the time when you read the fine print, those programs are not what you think they are. Secondly, even with a zero down payment programs like VA Loans and USDA Rural Development loans – zero down payment does NOT mean zero out-of-pocket costs.  You CAN get into a house with absolutely no pennies out of pocket – but it’s HARD, REALLY HARD. We strongly suggest that you have at least $1500 of money you can dedicate to buying a home for a zero down program, and strive for at least 5% down to get the best possible loans..

Be financially ready to buy a home

If you have nothing in the bank, and have been bouncing checks, you are not ready to buy.  If you have credit challenges, fix them before applying.  If you have a ton of debt, pay it off.  Living at home paying no rent allows you to spend like crazy, and you can afford that fancy new car.  But that same fancy new car and big credit card payments could easily derail a loan approval for having to high of a debt ratio.

Talk to a Mortgage Professional

Finally, when you think you are ready to buy a home, avoid the chatter from the internet, friends, family, and the Realtor… again not mortgage professionals.  Talk to, and apply with a fully licensed and experienced Mortgage Loan Officer. Let them professionally review your application, credit, and overall situation. They will advise you on what programs may work for you, how much house you can afford, how much money you may need, and will get you fully pre-approved.  Once you are approved, you can talk to a Real Estate agent about the home that fits your budget.

By the way, understand that all Loan Officers are not equal.  Only about 20% have a license. The rest are more of just an application clerk. Don’t work with application clerks. Read this article on how to pick an expert Mortgage Loan Officer.


Trick to pay off your mortgage in 1/2 the time

Pay your home off in half the time…

It isn’t a trick to pay off your mortgage in half the time, it is not some scam, it is actually really simple. Most homeowner don’t think they can do this, but the reality is, most actually can pull it off if you simply put your mind to it.

How?  Dump your 30-year mortgage for a 15-year mortgage. By switching to a 15-year mortgage, the average person will pay somewhere around 64% less over a 30-year loan.

Financially savvy homeowners are capitalizing on the savings they can reap by refinancing to a shorter loan term. Last quarter, nearly 40% of U.S. homeowners refinanced out of an existing 30-year fixed rate mortgage and into a shorter 15 or 20-year loan term.

With 15-year mortgages being near their cheapest levels in history, refinancing to a 15-year term is a very smart decision. Prior to 2012, 15-year mortgage rates were 0.52 percentage points lower than a 30-year loan. However, in last year’s fourth quarter they were averaging about 0.97 percentage points lower that a 30-year loan.

According to Freddie Mac, current 15-year loans require just $28,000 of mortgage interest per $100,000 borrowed. A 30-year mortgage costs $81,000 per $100,000 borrowed. Never in history have savings of this capacity been possible!!

Of course a shorter term loan is going to cost you more money per month today. But generally speaking, many people never ask, and don’t even know what the 15-year mortgage payment would be.

house_calcToday, a $150,000 loan:

– A 30-yr fixed at 4.625% would run $771.21 a month and interest of $131,539 over the life of the loan.

– A 15-yr fixed at 3.375% would run $1,063.14 a month and interest of $45,191 over the life of the loan

The vast majority of people with a slight modification to their financial priorities could easily afford the difference, save themselves a fortune in interest, and own their home in half the time.

View live mortgage rates in MN and WI, calculate your savings, and apply today.

How to respond to Low ball Offers

When selling your home, there is a good chance you’ll get a low ball offer.

Before you blow a gasket with a an outright rejection, take a deep breath and understand why.

First, it almost without fail has noting to do with your home, its condition, or your asking price.  It simply has everything to do with buyers thinking it is still 2009. Thinking you are a desperate seller, that they can low ball offfer, and that you’ll accept the offer. Buyers believe it is always worth trying a low ball offer.  The reality is a real estate agent has priced your home correctly, and that almost all homes sell today within just a few thousand dollars (up or down) from the asking price.

house_from_wordRemember that receiving a written offer means that there is a buyer who is seriously interested in purchasing your home. By holding your emotions in check, and responding with a counter offer, you may well turn that low price offer into a sale.  You, with help of your real estate agent, just need to move forward with a bit of strategic negotiation.

Your goal is to sell the house, and sell it at your asking price. Their goal is to buy your home at the lowest possible price.  Put your emotions away. It is a business transaction.  By simply keeping negotiation alive with a counter-offer you’ll almost always sell the house at a number comfortable for both buyer and seller.

Every situation is different, but, in most cases, the best negotiation strategy is to determine a price and terms that you are willingly to accept and respond accordingly. This may mean lowering your price and removing any seller concessions (such as paying closing costs) or it may mean sticking to your asking price, but giving in on a few of the buyer’s requests (such as leaving behind the appliances).

As a MN and WI based Mortgage Loan officer, I see that many of my buyers NEED the seller to pay closing costs. This term is very misleading, and many sellers are annoyed at paying the buyers closing costs. But remember, you are NOT really paying their closing costs. It is simply a way for the buyer to roll the costs into the loan. FOCUS on your bottom line, and don’t be concerned about paying the buyers closing costs.

Underwaters homes dramatically lower

Minneapolis, MN: Since the real estate market collapse, many home owners found themselves owning much more than their home was worth on the fair market. This created many problems, from the inability to sell and move, foreclosure from the inability to sell, and a hard time refinancing because of the lower value.

Homes for sale - real estate - MinnesotaThe housing market has been slowly climbing up the ladder, and according to a report from Zillow, the share of homes underwater has now dropped to under 20%

The same report stated that the underwater rate is currently about 19.4% of all homes. This is an improvement of about 3.9 million homes going back above water in 2013.  This is down from about 27.5%  of all homes underwater in late 2012.

As values increase, millions of people who may have had a pent up demand to move, but couldn’t, now suddenly find themselves once again above water.  More people are likely above water than actually realize, as many people rely on county tax statements for their value estimates. But tax value and fair market value, or what you could actually sell the home for, are many times two dramatically different numbers.

I advise anyone thinking of selling, to contact a local Real Estate Agent to get a fair market assessment of their home, and to contact a mortgage broker in their area to see what they would qualify for in a new home, or to see about refinancing.

The market is expected to slowly continue the climb towards a more balanced market, with the report estimating the negative equity of homes nationwide to drop even further, to just 17.2% by the end of 2014.