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Joe Metzler

How many homes should we look at before buying?

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You are fully pre-approved with your mortgage lender, and out looking at new homes.

How many homes should we look at before buying?

Minneapolis, MN Real Estate - Mortgage BrokerReal Estate Agents and lenders get this question all the time. The answer? It depends.

Realistically, most people only physically need to look at between 5 – 7 homes before deciding on which one to make an offer on. Some look at 1 or 2 homes before making and offer, and some look at 20 plus homes. The trick is to work with your Real Estate Agent and Loan Officer to have realistic expectations of your wants, needs, goals, and affordability.

The first step is to get pre-approved with a local Minneapolis area mortgage broker.

This way you’ve already discussed mortgage loan programs, down payment and loan requirements, and have set a realistic home purchase price. How can you even start looking at homes if you don’t know this information?

Meet with the Real Estate Agent

With mortgage knowledge in hand, now you can meet with a local Realtor to go over your housing needs, Bedrooms, neighborhoods, yards, features, priorities, and more. Your agent will discuss all of these items, and figure out a realistic plan. Usually they will then set up some automated listings to be sent to you by Email that meets your criteria. When you find some that you like, now it is time to physically go look at homes.

Because you’ve already discuss financing, and set good expectations with your Realtor, you can usually achieve the dream of home ownership without looking at dozens of homes. It’s all about educating them up front and getting on the same page.

First Time Home Buyers

Many first time home buyers in the Minneapolis, MN area look at a little high average, more like 7 – 10 homes before buying. This is OK, as they sometimes need to discover features and options on homes that they may have not been as familiar with as a move up buying looking at their second or third home.

The Bottom Line is that there is no set number

Each person is different. But if you’ve physically looked at more than 10 homes, it is probably time to sit down with your mortgage and real estate professional to re-examine your housing wants, needs, goals, and affordability.before they find the right home.

Senator introduces bill to expand HARP Refinance program

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HARP refinance in MNSenate bill S.1375, the “Rebuilding American Homeownership Act” has been introduced by Senator Jeff Merkley, D-OR to try and expand the existing HARP (Home Affordable Refinance Program”.

This has been called by many as “HARP 3“, and is designed to allow loans not currently owned by Fannie Mae of Freddie Mac to be refinanced through the HARP program.

Under the current HARP underwater refinance program, in order to qualify, your existing mortgage loan must be owned by Fannie Mae or Freddie Mac.

If passed, the bill would force Fannie Mae and Freddie Mac to refinance non-Fannie Mae or Freddie Mac loans, and to price in the additional risk into the interest rate so that the program would not cost taxpayers anything.

DO I QUALIFY FOR HARP?

Merley was quoted as saying the “It shouldn’t matter which financial institution owns a loan…” and that “all responsible homeowners should have the option to refinance and save money.”

Merkley also introduced another bill that would encourage people to refinance into loans terms of less than 20-years, which builds equity faster, by paying $1,000 of underwater homeowners closing costs.

Previous attempts at a HARP 3 program, or modifying the current HARP 2 program have not gain much traction in Washington, and these two new bills have no other sponsors.

How to tell if a condo or townhome is FHA Loan Approved

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When buying a condo, there is an extra step many home buyers may not understand that can effect the loan.

Lenders will credit qualify the home buyer, and of course do an appraisal review of the property.  But with any condo, the lender also needs to review the association.  This is done on all loans, including conventional, FHA, and VA.

If the buyer is using an FHA Loan, the condo or townhouse will need to have prior FHA Approval. If a condo association is  not FHA approved, it could indicate a problem with the association that could make getting financing in that complex hard or even impossible.

FHA Condo Association Approval Web site

 

How do I verify a condo association is FHA approved?

It is actually rather simple.  Simply go to the FHA condo website at https://entp.hud.gov/idapp/html/condlook.cfm.

I find it best to search by city or zip code rather than association name. It is the easiest way to get a positive search result.

If the complex is not listed, then it is not approved. If the association not approved, the association needs to get the approval. There is nothing the buyer can do on their own to get the association FHA Approved.

Many times, this forces the potential buy to switch to a conventional loan.  Conventional loans also need condo association approval, but on conventional loans, there is also a pre-approval process. But is the complex is not pre-approved, there IS case-by-case process on conventional loans.

A townhouse may actually be a condo

It looks like a town home, it acts like a town home, but it may legally be a condominium. Don’t assume. Be sure to check with your Realtor or the Association itself. A good rule, but not always is hidden in the legal description.  If it says “Lot and Block”, it is most likely a town home.  If is says “CIC” or Common Interest Community, then it is likely a condo.

Do you already live in a condo that is not FHA Approved?

If you already live in a condo and the association is NOT approved, you should attend the next association meeting to talk about getting the complex approved. Frankly, the lack of an FHA approval means less buyers can buy in your complex, therefore significantly reducing the value of your unit.  It doesn’t cost very much, and is not very difficult for the association to get FHA approval.

Three Great Reasons to Buy A House Today

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real1Thinking about buying a new home, but maybe still sitting on the fence? Here are three great reasons to buy a home today:

1. Home Prices Rising:  The Minneapolis, St Paul market, home prices have risen 15.1% in the last 12 months. The bottom of the market has come and gone. But there is a lot of room for upward movement. If prices continue to rise, and you buy now, your equity will begin to build as soon as you close.

2. Builders Are Building Again: Land costs more, materials cost more, labor costs more. This means new home prices are going up, too. Buying today may be your best option because the cost of new constructions isn’t likely to decrease.

3. Mortgage Interest Rates Still Historically Low: Interest rates are up from a few months ago, but still in the mid 4% range (as of today). This is still considered fantastically low. Mortgage interest rates are projected to be in the mid 5% range next summer, so buying today and locking in a super low rate is a smart move.

St Paul Home Price continue to climb

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Minneapolis and St Paul area home owners continue to see an upward climb in the value of their homes. The median sales price soared up 17.5 percent over last year.  According to the Minneapolis Area Association of REALTORS®, the June 2013 average value was $210,000, the highest it’s been since December 2007, just as the market was starting to crash.  By the way, mortgage interest rates at the time were about 6.10%.

house_from_wordLess homes for sale than what we’d like to see, combined with fewer foreclosures, and low mortgage rates continue to fuel these price increases.  New listings were up in June by over 20% from last year, but still there are more buyers than sellers,  sparking competition amongst buyers.

While mortgage interest rates are still historically low, they have increased about 1% from the lows back in May 2013 to around 4.50% today. This increase has put more pressure on the home prices as those who were sitting on the fence are jumping into the water before rates go even higher.

In the sub $250,000 price range, considered the “most affordable”, many homes are selling very quickly with multiple offers just days on the market.  Therefore all prospective buyers need to be fully lender pre-approved and ready to make an offer the moment they see a house they love.

Rising home prices and higher mortgage rates caused housing affordability to decrease by 15.9 percent from last year. However, home prices remain well below pre-housing-crisis levels and mortgage rates remain historically low, even after the rate increase.

 

Getting a mortgage loan after paying cash for a home

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In today’s market, it is pretty common to pay cash for a home in the Twin Cities area. Maybe because you needed to act fast and didn’t have time to get a loan, or maybe because of the condition on the home, the house wouldn’t qualify for traditional financing.

Regardless of the reason, I speak with a lot of customer who pay cash for a home, then want to take a standard mortgage loan out against it right away. You may be able to take cash out, but there are rules to understand.

Cash out refinanceCash back after buying with cash rules

While each lender may be slightly different, here is the common Freddie Mac rules for getting cash back.

Primary Residence and Second Homes Only:

If you’ve owned the home MORE than 6 months.  Normal cash out refinance rules apply.

If you’ve owned the home LESS than 6 months,  then ALL of the following requirements must be met to get the loan:

  • The executed HUD-1 Settlement Statement from the purchase transaction must evidence that no financing secured by the subject property was used to purchase the subject property.
  • The Borrower must be reflected as the owner of the subject property on the preliminary title report and there must be no liens on the subject property.
  • Source of funds used to purchase the subject property must be fully documented.
  • If funds were borrowed to purchase subject property, those funds must be repaid and reflected on the HUD-1 Settlement Statement for the refinance transaction.
  • The amount of the cashout refinance Mortgage must not exceed the sum of the original purchase price and related Closing Costs, Financing Costs and Prepaids/Escrows as documented by the HUD-1 Settlement Statement for the purchase transaction.
  • There must have been no affiliation or relationship between the buyer and seller of the purchase transaction.
  • The cashout refinance Mortgage must comply with the applicable Loan-to-Value ratio limits and all other Freddie Mac requirements

Homebuyer jump into market as rates rise

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Mortgage rates have risen about 1% since May 2013, and that is clearly making potential home buyers jump into purchase contracts more sooner than later according to a recent Fannie Mae housing survey.
Real Estate, Minnesota, Minneapolis, for sale, mortgage rates, interest rates
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The survey shows 57% of people expect mortgage rates to rise in the next 12 months, with just 7% responding that rates will remain stable. The previous survey indicated only 46% of people expected mortgage rates to rise.

Potential home buyer clearly see the writing on the wall, and anyone even close to purchasing a home realize interest rates, while up from previous lows, are still historically good.  Given the fact home prices are rising and rates are rising, homebuyers have decided that now is time to get off the fence and get serious about buying real estate.
Americans’ outlook on the economy deteriorated slightly, though many were more optimistic about their personal situation. The share of people who expect their own personal financial situation to improve over the next year jumped to 46%, its highest level in three years, while  16% said they expect their situation to worsen, unchanged for the third consecutive month.

HARP Refinance still going strong in MN and WI

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The Federal Housing Finance Agency (FHFA) special underwater refinance program, commonly known as HARP (Home Affordable Refinance Program) is still going strong.

HARP refinance in MNWhile mortgage rates have risen a bit, there are still millions of people who could take advantage of the program to save significant money on their monthly mortgage payments.  Because of this, the FHFA had Fannie Mae and Freddie Mac extend the HARP program by two years to December 31, 2015. The program was originally set to expire December 31, 2013.
More than 2.2 million homeowners have already refinanced through HARP since HARP was introduced by FHFA and the U.S. Department of the Treasury in April 2009.  HARP is uniquely designed to allow borrowers who owe more than their home is worth the opportunity to refinance their mortgage.Extending the program will continue to provide borrowers opportunities to refinance, give clear guidance to lenders and reduce risk for Fannie Mae, Freddie Mac and taxpayers.
In addition, FHFA will soon launch a nationwide campaign to inform homeowners about HARP. This campaign will educate consumers about HARP and its eligibility requirements and motivate them to explore their options and utilize HARP before the program ends.

To be eligible for a HARP refinance homeowners must meet the following criteria:

  • The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The current loan-to-value (LTV) ratio must be greater than 80 percent.
  • The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one
  • late payment in the last 12 months.

Check here to see if your loan is owned by Fannie Mae or Freddie Mac

Stop worring about inquiries on your credit report

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Inquiries on your credit report

Plan on getting a home loan soon? Worried about qualifying for a mortgage? Need to get pre-approved to buy a home in Minnesota or Wisconsin? Think your credit score will go down?

For 99% of the people, 99% of the time, you don’t need to sweat a lender pulling your credit report!

Sorry, Minneapolis rates are NOT going back down!

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Minnesota mortgage ratesMinneapolis, MN:  This isn’t easy to say, but understand…  rates are NOT going back down to where they were last month.

Today’s mortgage rates for the best customers at about 4.625%, but range up to  above 5%, based on lender, credit score, program, down payment, etc..  Our quoted rates today are 1/2% higher than just last Monday. Volatility is the name of the game, as we have seen rates  jump by as much as .25% in interest rate in a single day. What we quote in the morning may be long gone by the afternoon.

With the drastic and dramatic jump we’ve seen since May 3rd, consumers may have thrown the brakes on for looking at houses, or refinancing  – waiting for rates to come back down.  It is important that you a work closely with your favorite Mortgage Loan Officer to understand rates, what they are, why they move, and if you should lock in a rate.

While I don’t know for sure, I believe the 4.50% – 4.75% range is our new floor of support for a little while.  We may see a slight uptick, and we may also see a minor drop as the market players settle into the new reality, but the 30-year fixed rate loan in the 3’s is now just a memory.

 

As mortgage rates climb, beware of not accurate quotes

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Fed Chairman Bernanke

St Paul, MN: Mortgage rates the last few weeks have climbed steadily on the statement from the Federal Reserve that they plans to scale back, and ultimately end the buying of Mortgage backed Securities by the middle of 2014.
This news translated into mortgage rates having one of the worst weeks in history, with Friday alone generating a 1/4% rise in interest rates. While 1/4% isn’t a killer by itself, combined with the rate increases from the earlier part of the week, the combination proves to be a nightmare for mortgage rates. Real mortgage rates ending Friday for the best clients are now about 4.625%.  This compares to 3.50% just a month ago.

BEWARE OF WHAT YOU READ – Not all Mortgage Quotes are current

I took numerous calls this week, where clients complained about the rate I was telling them compared to what they were reading elsewhere for “average rates.”  Most of the average rate information published on web sites, newspapers, and reported by the media comes from the weekly rate report published by Freddie Mac.  While the report is great for tracking averages over time, it is the AVERAGE of rates compiled through the end of the previous week, then reported on the following Thursday.

freddieAnother problem is many web sites don’t update daily, or even weekly.  Newspapers, and other print media may have collected rate information on Wednesday morning for publication in Sundays paper. This week, that would leave people with quotes at least .375% to .500% lower than reality.

If you are buying Google stock, does it matter what last week average price was, or what you can buy if for today?  Only rely on constantly updated and accurate rate reporting system, or while a phone call to a Loan Officer.

Check LIVE and CURRENT MN and WI Mortgage Rates 24/7

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As rates rise, should Real Estate agents worry?

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Minneapolis, MN:  Yesterday the Federal Reserve “clarified” to everyone when it will likely end its economic stimulus program.  This ended weeks of speculation that has caused mortgage rates to surge to the highest levels since 2011, and up over 1/2% in physical rate in the past two months.

house_new_constructionBased on the news, it appears mortgage rates have a new bottom, which is about where they are at today. There is plenty of room for rates to move higher.  Express this to your clients, and get the fence sitters moving.

Loan Officers and Real Estate Agents have great fear for future purchase activity.  Is it founded?  “There should be some concern, but overall, I only expect a minor slowdown in purchase activity. People always buy homes, regardless of rate.” said Eric Metzler, a Senior Loan Officer with Cambria Mortgage in St Paul, MN.

Will home sales fall as rates rise?  Sure… But most people will still buy, just maybe a little less home. As for the future?? If you are a full time experienced agent with a good past client based, I wouldn’t worry about it.

Desperate Loan Officers

Today, a huge number of Loan Officers have been living largely on refinance activity.  This business will drop dramatically as rates creep up.  Many of these Loan Officers have little, if any, purchase business experience.  We would expect to start seeing layoff’s from many of the larger banks, and online refinance powerhouses.  We should also start seeing Loan Officers back again hitting the streets, trying to drum up Realtor referral business.

My world of advice is to pass on refinance specialists trying to turn into purchase loan hopefuls.  While basic loan requirements are similar, purchase loans have a whole new world of requirements for these Loan officers, and you don’t want them experimenting on you and your clients. Stick with licensed, and experience purchase loan specialists like myself.

 

Mortgage Rates Annihilated

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Minneapolis, MN: Mortgage rates continue to creep higher, as the Fed has announced a plan to scale back their buying of mortgage backed securities.

lmrWhat is causing rates to rise?

The Mortgage-backed-securities (MBS) market is what dictates loan pricing.  Simply put, the government has been artificially holding down rates by buying billions of dollars worth of mortgage backed securities. The ideal is simply to stimulate the economy and job growth with cheap money.  As the economy and job markets improve, the FED has said it would start to taper, then completely end their purchasing of mortgage bonds.

Without the FED buying bonds, fear has taken over.  Fear is never in the markets favor, as one can clearly see in the run up of mortgage rates.

As many of you know, we are currently in round three of the Fed buying bonds.  At the end of round one, when the Fed backed off of buying bonds, rates started moving higher, and quickly.  At that time, the Fed quickly jumped back in to settle things down. We don’t see that happening this time around.  As a matter of fact, the Fed has clearly noted that rising interest rates is something they want.

Actual Effect

The past two month, we have good from best execution 30-year fixed rates about 3.50%, to today, best execution 30-year fixed rates about 4.25%. That is the highest we’ve seen since late 2011. This is also the sharpest rise in rates in 10-years.

If you are even remotely thinking of refinancing, you’d better do it now.  If you are thinking of buying a house in the very near term, you should do it now.  If you are thinking of buying somewhere down the line, you are likely to see higher mortgage rates…  But nothing that should ever stop anyone from buying a home.

For perspective, read this previous article of mine on mortgage rate history.

Should you float of lock?  Read this daily rate lock advisory

Mortgage Rate Perspective

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balance_ratesMinneapolis, MN:  With rates having moved up slightly recently, it is good to keep current mortgage rates in perspective.

Here is a mini historic look at conventional 30-yr fixed loan rates

  • In the early 1960’s = 5.25%
  • In June 1971, about 7.53%
  • In June 1981, about 16.70%
  • In June 1990, about 10.16%
  • In June 1998, about 6.99%
  • In June 2000, about 8.29%
  • In June 2005, about 5.58%
  • In June 2009, about 5.52%
  • In June 2010, about 4.75%
  • Last month (May 2013) about 3.54%
  • Today… about 3.91%

I bought my first house in 1981.  I paid 16% for my FHA 30-year fixed!  That same loan today is 3.50%

Less underwater homes as values increase

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banner_ad_appraisalUnderwater Mortgages Drop by 850,000

Minneapolis, MN:  Millions of homes went underwater at the beginning of the real estate and mortgage crash. Underwater homes, where the owners own more on the mortgage loan than the home is currently worth, have been a thorny issue, preventing many people from refinancing to today’s low mortgage rates, or from selling their homes.  If has also cause many people to throw in the towel and simply walk away from their home.

CoreLogic, a real estate data firm has reported that an estimated 850,000 homes are no longer underwater in the first quarter of 2013 due to rising home values.  They also reported that another 11.2 million homeowners are now in a “low equity” position, which means they are no longer underwater, but have only a little equity.

This means an estimated 9.7 million homes, about 1 in 5 are still underwater.

Another 11.2 million homeowners were in a low-equity situation, not underwater on their mortgage but with less than 20 percent equity in their homes, a situation that can make refinancing difficult or more expensive.

Rising values

The combination of low mortgage rates, and less foreclosures on the market has help boost values and increased sale prices the past year.  In the metro Twin Cities area of Minneapolis / St Paul, average home values have risen 15.1% in the past year alone.

Real Estate is local

Just a few states account for the almost 1/3rd of underwater homes. Florida, Michigan, Arizona, and Georgia. Many people in the Twin Cities are now able to sell and move up to a bigger home, or to easily take advantage of low mortgage rates again, especially with programs like HARP, the Home Affordable Refinance Program, which was specifically designed to assist underwater homeowners who got their current mortgage loan prior to June 1, 2009.