Closing Costs on a Home Mortgage

All home mortgage loans have fees knows as closing costs, which are required to process and obtain your home loan.

People involved include the lender, title companies, appraisers, credit bureau, county document recording fees, and even state mortgage deed taxes.

You also need to buy you first years home owners insurance, and pay pro-rated property taxes based on when taxes are due, how much they are, and what month you buy the home.

All of these closing costs can really add up, and are in ADDITION to your down payment. Your Loan Officer can give you a breakdown of what all these costs will add up to when you apply for your home loan.

HOW TO PAY MORTGAGE LOAN CLOSING COSTS

There are 4 basic ways to pay your loans closing costs:

1. Pay cash out-of-pocket at closing
2. Get a downpayment and closing cost assistance loan
3. Roll the closing costs into the loan amount – This is commonly known as “Seller Paid Closing Costs”
4. Roll the closing costs into your loan by taking a slightly higher interest rate (not available on all loans)

or a combination of any or all of these options

NOTE: All lenders have basically the same closing costs. Any lender quoting closing costs significantly less than anyone else is just doing option 4, but not telling you.

Paying your loans closing costs out-of-pocket is always best in the long-term, but simply not realistic for most first time home buyers. Between all the other options to pay closing costs, most people are able to buy a home with ONLY needing their down payment.

CLOSING COSTS AND FEES NEEDED UP FRONT

Some fees and closing costs are required up-front by your mortgage company when buying a home. The two most common items are:

Paying for a credit report at time of application. This runs between $10.00 to $20.00
Paying for the appraisal once your offer to buy a home is accepted. This runs between $375 to $500

COSTS REQUIRED TO BUY THE HOUSE

Of cost there is your down payment. Your Loan Officer will discuss how much you will need after reviewing your full loan application, and determining what mortgage program you qualify for, how much the house is you are buying, and if you are using any downpayment assistance programs.

There are two up-front costs many people don’t understand you need when buying a home.

The first is earnest money. This is required by the seller as good faith money when you make your offer to buy.

It can vary, so talk to your Real Estate Agent, but at least $1,000 is very common in Minnesota. The earnest money gets credited towards your down payment and closing costs.

The idea is if your offer is accepted, but then later you decide not to buy the home, they keep your earnest money for wasting the sellers time. So be sure you are serious when making an offer to buy a home.

The second is a Home Inspection. After your offer to buy the home is accepted, it is very common, and very smart to get an inspection on the home to make sure there are no hidden surprises. Talk to your Real Estate Agent to set up a home inspection. Home inspections generally run around $300 – $400.

THE INITIAL FEES WORKSHEET AND GOOD FAITH ESTIMATE

Talk to your Loan Officer about getting a full breakdown of how much money you will need out-of-pocket to buy your new home.

This detailed breakdown will show you everything you need to know, and the final amount of money needed at the actual closing.

It is show your down payment, and all your closing costs. Then it will show you any credits to these costs, including seller paid closing costs, lender credits for interest rate, and any items you have already paid, like credit reports, appraisal, and earnest money.

Before you have the exact house, you will get an initial fees worksheet – or a close estimate based on the ballpark price of the homes you are looking at.

Once you actually buy a house, and we know the exact address, exact purchase price, etc., you will receive a Good Faith Estimate, which while still an estimate, will be incredibly close to the exact penny you will need to finalize your home purchase.

As always, feel free to contact our first time home buyer expert Loan officers at (651) 552-3681 with ANY question whatsoever.  We lend in MN, WI, IA, ND, SD only.  For more accurate service, complete the online loan application first.

Want to Buy a Home? Pick the right mortgage for you

St Paul, MN: Most lenders offer a wide selection of home loan programs. Which one is the right one for you?

Some popular types of mortgage loans include:

• Fixed-rate mortgages. These are a good choice if you’re looking for the same monthly principal and interest payment over a fixed number of years.
• Adjustable-rate mortgages (ARMs). ARMs offer an initial lower interest rate and lower payments. Your interest rate and payment can go up or down in the future.
• FHA Loans and VA loans. These government-backed loans are popular with first-time homebuyers because of their low down payment requirements and closing costs.
  • Standard FHA (Federal Housing Administration) loans require only 3.50% down payment.
  • VA (Department of Veterans Affairs) loans are available to eligible veterans with no down payment up to $417,000, and a small down payment over $417,000.

Work with an experienced mortgage lender near you to determine which program is right for you and get an idea of current interest rates, or estimate your new homes payment using our mortgage payment calculator.

For additional information, download a helpful Homebuyer’s Handbook.

Home construction slowest since Sept.

U.S. home construction fell in June to the slowest pace in nine months, a setback to hopes that housing is regaining momentum and will boost economic growth this year.

Construction fell 9.3 percent last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday. That was the slowest pace since September and followed a 7.3 percent drop in May, a decline even worse than initially reported.

Applications for building permits, considered a good indicator of future activity, were also down in June, dropping 4.2 percent to a rate of 963,000 after a 5.1 percent decline in May.

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Check current St Paul Minneapolis MN area Mortgage interest rates – NO SSN Required

Top credit report move that will wreck your mortgage approval

Getting a mortgage loan these days is overly complicated, and annoyingly paperwork intensive. This is simply a response to the market collapse that started a few years ago, when it seemed like everyone could get a loan.

If your credit report isn’t perfect, a super common “trick” that credit repair companies and consumers try is to dispute credit accounts.

While disputing incorrect credit accounts is OK, it IS NOT OK right before applying for a mortgage

Disputing a charge, balance, payment history, or any aspect of the credit obligation places the account in the dispute status. This adds  “in dispute” to your actual credit report until the dispute is resolved.

So Why Is This A Problem?

The powers that be who make underwriting guidelines (Fannie Mae, Freddie Mac, FHA, VA, etc) have decided that whenever an account is in dispute, your credit report no longer provides a 100% accurate picture of the persons credit history.  Therefore all the computerized systems used to underwrite the initial aspect of your file ignores accounts in dispute, and your file either becomes automatically rejected, or is switched to what is known as a manual underwrite.

Manual underwriting dramatically changes maximum debt ratios, program guidelines, and the level of documentation needed. Manual underwriting could easily take a file that should be approved, and turn it into a denial.

The solution:

If you are thinking of buying a home and have credit challenges, you need to work on credit repair when you start thinking of buying a home, not once a loan officer says you have issues. Everyone has an idea of where their credit sits. Act early.

Next, don’t dispute anything or everything on your credit report. If an account is negative, but accurate, disputing is a waste of time.  I’ve seen people try disputing their bankruptcy!  Really??

Finally, you can talk to the credit bureau to remove the dispute item comments from your credit report in most cases.  It may take some time, so again, plan ahead. Do it before you’ve fallen in love with your dream house!

Minneapolis, MN: Current mortgage interest rates are hovering just a hair above historic lows.  So why are record number of home buyers not buying?

So do interest rates really matter? Sure, they’re are a very big key component in a person’s decision to buy because of the borrower’s monthly mortgage payment. And often the first conversation between a real-estate agent and a potential buyer —”How much are you willing to spend?”— can be influenced quite a bit by mortgage rates.

Given the initial desire to buy a home isn’t purely rate-driven, home buyers must weigh what’s for sale, their family and job situation, what the payment might be, etc. It could take a while to see what effect, if any, the recent drop in interest rates has on demand for homes… But lower interest rates, as the word spreads, should increase demand for homes.

What does this payment picture look like right now? The monthly payment on the loan itself (not including taxes and insurance) on the median-priced U.S. home fell from $673 in February 2011 to $552 in September 2012 as interest rates fell.

Interest rates stayed low through May 2013, but the average payment rose to $586 as home prices ticked up. (These calculations assume a 20% down payment on the national median home value as calculated by Zillow).

Looking to buy a home with a Zero Down Payment USDA Rural Development Loan?

You don’t need to buy a home in a cornfield to use the USDA Rural Housing loan, but the property does need to meet their rural definition, and many areas qualify.

USDA loans, like most others, require mortgage insurance. Effective October 1, 2014, the monthly mortgage insurance on a USDA loan will increase to .50%.  This is up from the current .40%.

On a sample $100,000 loan amount, the new mortgage insurance costs would be $41.87 a month, up from the current $33.49 a month.

While no one likes the increased costs, USDA loans still have some of the lowest mortgage insurance costs of any home mortgage program, and is still an amazing value.

Learn more about USDA Rural Development Loans in MN, WI, IA, ND, SD

Tips for getting a VA Loan in MN or WI

If you are an active or military veteran, the VA home loan is one of the most amazing benefits provided to you for your service to our country.

The two biggest benefits of a VA mortgage loan are simple…

1. No down payment required
2. No monthly mortgage insurance, which can save you a HUGE amount of money when buying a home.

Basic VA Loan Eligibility Requirements for a VA loan

The first step is to understand if you qualify for VA Loan benefits.  The vast majority of people with regular service in the Army, Navy, Air Force, Marines, or Coast Guard qualify as long you have served  active duty a minimum of 181 days (90 days during the Gulf War). and you haven’t been dishonorably discharged.

Reserves and National Guard have to have completed 6-years of basic service, or at least 90-days of active duty (deployed) service.

There are all sorts of additional rules and guidelines in terms of service less time, and still qualifying. These include hardship early out, and service related disabilities. There are even options for the surviving spouse of a veteran who passed away during active duty to obtain a VA home loan.

Anyone dishonorably discharged from service does not qualify for a VA Loan, and some with less than honorable discharge may also not qualify.

Always check with an experienced VA Loan Officer if you have questions about your eligibility.

Certificate of Eligibility (COE)

All VA are require to obtain a copy of your VA certificate of Eligibility (COE).  The certificate tells the lender if you qualify, if you have a service related disability, and if you’ve used your VA Loan benefits previously.

Most veterans don’t seem to know where their certificate is these days – but that is OK.  Experienced VA Loan officers can usually obtain your COE in just a few minutes through a special VA Lender Portal called ACE.  Sometimes we can’t get it, and will need you to sign VA Form 26-1880, and for you to supply your discharge papers (like a DD214)

VA Home Loan Specialist

While most of the basic guidelines for a VA Home Loan are similar to any other mortgage loan, there are enough other requirements that anyone not specifically trained and experienced in VA loans is someone to avoid.  I hear from people all the time that they started a VA loan application at some other company, only to realize the loan officer has no VA loan experience.

Before you apply for a VA Loan with just anyone, I strongly suggest you contact a local to your area VA Loan Specialist.  Someone right down the street that you can go meet with well documented VA Loan experience.

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

The 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.

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

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.

Your 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.