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Home Buyers

Information and news for home buyers, especially first time homebuyers

Interview Questions for your Real Estate Agent

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Buying or Selling A Home? Questions to ask your REALTOR®

1.  How does this Agent work?  Certain hours a day?  Certain days of the week?  Will you be able to find a mutually agreeable time frame? Full time, or part-time agent?

2.  What experience does this Agent have?  Do they have a specialty?  It’s difficult for a commercial Agent to sell a residential home.  The forms are different, terms, negotiations, etc.  Make sure they are capable of helping you in the type of real estate you are looking to purchase.

3.  How many successful transactions has this Agent had under their belt?  It’s not necessary for an Agent to be the highest top producer, but you need to know how versed they are in the entire process.  Asking a trusted friend for a referral might help you in this area.

4.  What happens if the Agent is out of town, calls in sick or just can’t make your scheduled times?  Does this Agent work with a Team, or have a designated assistant that can fill in, or will you have to wait for the Agent to return back to work to help you?

5.  And lastly an understanding of the expectations of all parties involved.

 

Low appraisals hurting housing recovery

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Story from KARE TV in Minneapolis / St Paul, MN. Story touches on it lightly, but misses the major issue that new mortgage lender / appraiser rules put into place in 2009, known as HVCC (Home Value Code of Conduct), now simply known as the Appraiser Independence rules, are the real problem. Appraisers are the holders of the countries equity, and the new rules have caused trillions of dollars in lost equity.

What do you think?

 

The FHA 203k Rehab Loan in MN / Fix a Fixer-Upper

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Found your dream home – But it needs a little repair? The FHA 203k rehab loan to the rescue!

Minneapolis, MN: The FHA  203(k) loan program offers borrowers the resources to buy that great fixed-upper home opportunity. One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home.

There is no doubt that the current real estate market offers a lot of great bargains on bank owned, Foreclosed, REO, Repo’d, etc homes. However,  many of these homes are in poor condition. Missing appliances, ruined carpet & flooring, holes in the wall, etc.  Most lenders don’t offer loan programs that will be able to help folks buy homes in this condition.

This is where a little known program called the FHA 203K Rehab loan comes in. The FHA 203K Rehab loan is becoming very necessary for the purchase of many Bank Owned, REO, or Repo properties.

FHA 203K streamlines loans make the process of buying a home that needs a little TLC (or quite a bit in some cases!) easier, more affordable, and quicker. Many of us have seen firsthand, or have heard stories about foreclosed home that have been torn up, stripped, vandalized, etc. With conventional financing, these homes are very difficult to sell or buy, as they are not in move in condition, and most lenders will not lend on a damaged home.

 

Is a 203(k) Loan Right for You?

  • Buy a “Fixer-upper” or REO property needing renovation
  • Get funds to both purchase and upgrade your dream home
  • Refinance and renovate your existing home

Advantages of 203(k)

  • Loan amount based on the home value including renovations
  • Only one loan needed to both purchase and improve
  • Refinance and rehab your own home

Can be used to buy property otherwise not eligible for financing

Who Qualifies?

  • A minimum down payment of 3.5%
  • A credit score of 640 or higher
  • You currently have no other FHA loans
  • You DO NOT have to be a first-time buyer
  • Home will appraiser for the purchase price PLUS repair costs
  • Loan amount meets FHA Loan limits, which vary by county (Check FHA  limits in your area)

 Download a Streamline 203K Presentation

 Download a Free Home Buyer Handbook

Are home sellers stupid?

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“Broker Bryant, How much do you think our home is worth?” “Well, Mr. Need T. Sell, I think you house is worth about $260,000. However, I’m not here to tell you what your house is worth, I’m here to tell you what it will take to get it sold. In my opinion, I think we should Range Price your property from $239,000 to $259,000 trying to sell as close to $250,000 as possible.” He says in shock, “Broker Bryant, are you crazy? I just had it appraised 6 months ago and it appraised at $275,000! There is no way I am giving my house away at $250,000.”

Now being the “good looking” Realtor that I am, I respond, “Mr. Need T. Sell, you have been on the market for 6 months priced at $265,000 and told me you have not had a single showing. How has that been working out for you?”

He looks at me sternly and says, “Broker Bryant, the reason our house didn’t sell was because our Realtor didn’t do anything. We asked her to run an ad in the paper and she never did. All she did was put up a sign and put our home in the MLS. You can’t sell a house like that. I don’t know how they ever sell a house. All she ever did was call us every month and tell us to reduce the price. That’s the only time we ever heard from her. She’s the one that said she could sell our house at $265,000.”

READ THE FULL STORY

 

8 things that will screw up your mortgage closing

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Minneapolis, MN:  In the home mortgage approval process, things are not what they used to be.  Underwriting now goes over your entire life with a fine tooth comb.  It really isn’t something to be scared of, if you deserve a loan, you will still get one.

FHA Mortgage Loan Expert in MN and WI
FHA Mortgage Loan Expert in MN and WI

But, there are several places buyers often do things that can turn an approval into a denial. In the excitement of purchasing their new home, they may prematurely make financial moves that impact their mortgage loan approval. Lenders now run a final credit check within a few days of closing, and if it is different from the original credit report, it may be a deal breaker.

Here is a list of 8 things that will screw up your mortgage closing.

1.      Don’t change employment status.  Seems simple, but I’ve had many people over the years quit their job, be laid off, or even terminated

2.      Don’t make any major purchases:  Furniture for the new house sounds great, but can blow your debt-to-income ratio right out of the water.  So can new cars.

3.      Don’t increase credit card debt or miss any payments.

4.      Don’t change bank accounts or make undisclosed large deposits. Any large non-payroll deposit on your last two months bank statements need to be explained and proved.

5.      Don’t apply for a credit card, co-sign on a loan or make a credit inquiry.  Any changes to the original credit report need to be explained and documented.

6.      Don’t spend money set aside for closing, not any, not ever.  Again, seems like common sense, but I once had a client spend their down payment money on a moving truck.

7.     Any delay in providing all paperwork asked for by the mortgage company can and does cause huge problems. When the Loan Officer asks for something, don’t argue or question why they want it, just drop everything and get it to them ASAP.

8.      If you change anything…  anything, let the lender know. You’d be surprised how many times deals get to the closing table and this is the first time the lender finds out the purchase price changed.

Buyers must be sure there is nothing happening personally or financially that might put the closing at risk.  It is too common for buyers, being approved for a mortgage loan, to think that relatively smaller financial issues won’t matter.

The bottom line is tell your Loan Officer everything, and we’ll make sure you have a smooth, stress free, no surprises closing.

Why do short-sales take so long?

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Making an offer on a short-sale home? Extreme patience required!

Minneapolis, MN: So why do short sales take so long? I get asked this question all the time. There are many reasons, some obvious, some not so obvious. Simply said, the seller owes more on the home than the home is worth today, and they are about to ask the bank to accept an amount lower than what is owned.  If I owed you $200,000, and randomly called you to say, “will you take $150,000 and call it good”, what you you say?? What would YOU do before you simply decide to accept less money?

SHORT SALE BASICS

Below, you’ll find some facts that people are usually surprised to hear about short sales and why short sales take so long:

    1. The distressed homeowner decides to seller the home
  • The homeowner then begins working with a real estate agent, (not the lender), to determine how much money the home is worth today, and how much they will have available to pay the lender minus real estate commissions, closing costs, any additional liens, etc…
  • The home is put on the market
  • A buyer signs a purchase agreement contingent on the bank accepting a short payoff.
  • The bank is unaware of anything at this stage.
  • The homeowner and their real estate agent presents the short offer the bank along with the potential buyers offer.
  • This Short Sale Package must provide an accurate and compelling story regarding the homeowner and the hardship that is preventing them from continuing to make their mortgage payment.
  • The bank will start reviewing the information provided to determine the homeowner’s eligibility for a short sale, based on their hardship and the current market value of their home.
  • The bank could have hundreds of files that they are working on, and are at various stages in the process, at any given time.
  1. The bank will request a variety of reports and documents to substantiate the homeowner’s income and assets, as well as the market value of the property. Often, these requests are made several times, at various stages, throughout the short sale process.
  2. There can be many lien holders that must agree to basically give up their interest in the property. This includes 2nd mortgages, securitized asset holders (Fannie Mae or Freddie Mac) and even private mortgage insurance companies. Getting all those people to agree is very tricky and time consuming
  3. Just because the homeowners is trying to sell the house for less than is owed, does NOT mean the bank will accept the short offer

All this takes time.  Usually around 90 – 120 days.  Sometimes shorter, sometimes longer. 

Mortgage Rates Hold Steady while waiting for further stimulus

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Mortgage Rates Hold Steady as Markets wait on Further Stimulus News

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates holding steady from the previous week and remaining near their all-time lows. The average 30-year fixed-rate mortgage has been below 4.00 percent all but once this year and the average 15-year fixed, a popular choice among refinance borrowers, has been below 3.00 percent since the last week in May.

News Facts

  • 30-year fixed-rate mortgages (FRM) averaged 3.55 percent with an average 0.6 point for the week ending September 13, 2012, the same as last week. Last year at this time, the 30-year FRM averaged 4.09 percent.
  • 15-year fixed rate mortgages this week averaged 2.85 percent with an average 0.6 point, down from last week when it averaged 2.86 percent. A year ago at this time, the 15-year FRM averaged 3.30 percent.
  • 5-year adjustable-rate mortgages (ARM) averaged 2.72 percent this week with an average 0.6 point, down from last week when it averaged 2.75 percent. A year ago, the 5-year ARM averaged 2.99 percent.

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

“Despite a lackluster August employment report, Treasury bond yields and mortgage rates were little changed this week with the financial markets speculating on further monetary stimulus from the Federal Reserve. The economy added 96,000 net new workers in August, while revisions subtracted 41,000 from the prior two months; manufacturers cut 15,000 employees in August which represented the largest decline since August 2010. Meanwhile, approximately 368,000 people left the workforce thereby lowering the unemployment rate to 8.1 percent.”

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.

Follow this link to view today’s MN and WI mortgage interest rates.

Should you refinance, modify, buy, or run away?

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Saint Paul, MN: These are certainly trying times, and 70% of homeowners have some sort of financing on their home. The economy is hurting, and fear of job loss is on many minds. But what you should be doing in today’s market isn’t always clear.

The economy is hurting largely because of the initial wave of foreclosures and high gas prices of earlier in 2008. This has spilling over into all aspects of American lives, but is it really as bad as the constant beat of the media drum has one to believe?

Unemployment nationwide is averaging in the 8% range. This is significantly below the highs of years past. Foreclosures are still at historic high levels. These reports sound bad, but sit back and take a look at your own individual lives to examine if it really is bad for you and what you should be doing.

For example, while possible job loss is on a lot of minds, examine your own ability to market yourself? No job is guaranteed. If you did lose your job, how quickly can you replace it with a similar income, even if in a different field.

I am in the mortgage business, which clearly is suffering. I don’t worry about my home or income, because I know that if needed, I would take two or three jobs (even menial jobs) to always make sure my family has the three most important items: Shelter, food, and clothing. I know I can cut off cable TV, sell cars, cut expenses, and go into survival mode and that I will always be able to provide the basics.

If unemployment is averaging 8%, this means 92% of people are working. If foreclosures are averaging 10% of homes, this means 90% of people are OK. Turn off the TV, stop reading the paper. If you didn’t hear and read all the “bad news”, how would YOU personally view your situation?

BUYING A HOME: We all need a place to live. Home prices are extremely attractive, with great deals to be found everywhere. Mortgage rates are near historic lows. If you have OK or better credit, can come up with a small down payment, plan on staying in the home for at least four years, you are almost foolish to not buy something TODAY.

MODIFYING YOUR EXISTING LOAN: Many people bought homes they shouldn’t have and took risky loans to do so. Simply because a lender said yes, doesn’t mean you should have. Even more people who originally bought right used their homes as ATM machines, with a constant “cash out” refinance to pay credit cards and live lifestyles they couldn’t afford. I just spoke with a customer who bought this home 15-years ago for $85,000 who is losing it to foreclosure owing $300,000.

As little as two years ago, getting a bank to modify your loan was rare, and required you to be seriously behind in payments. Today, banks are very willing to help keep you in your home by modifying your payments. Workouts vary greatly depending on many variables, but the best ones we see lower your rate to around 3% for 5-years. Then the rates start adjusting back to where they originally were.

Unfortunately, we are seeing two problems emerge with modification. The first, is many people who got loan modifications fairly quickly fall behind again. While no one wants to lose a home, you must be realistic. Many times I speak with people where I calculate a payment based on ZERO percent, and they still tell me they can’t make the payment. Modifying only delays the inevitable. Getting out completely and into a situation you can afford releases untold weight off your shoulders.

REFINANCING YOUR EXISTING LOAN: Minnesota refinance rates are currently hovering near historic lows and it is well worth thinking about getting something better if you qualify. The basic criteria is that if you can lower your rate and you’ll be there long enough to at least break even on the closing costs, then it is a smart move.

Today, programs like VA IRRRL streamline refinances, FHA streamline refinances, and HARP 2.0 loans make refinancing available to most people.

So, should you be buying a home, modifying your existing loan, refinancing, or running away? It all depends, but I suggest we all stop living in fear, properly analyze our lives and personal situations, take our heads out of the sand, and make well educated decisions to put our lives in a better place.

An original article by Joe Metzler (C) 2012 Metzler Enterprises, LLC for www.MnRealEstateDaily.com

Mortgage Rates Change Little, Remain Near Record Lows

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Mortgage Rates Change Little, Remain Near Record Lows

Minneapolis, MN:  Freddie Mac today released the results of its Primary Mortgage Market Survey® , showing fixed mortgage rates declining or remaining the same from the previous week amid mixed economic data, and continuing to hover around their all-time record lows.

News Facts

  • 30-year fixed rate mortgage averaged 3.55 percent with an average 0.7 point for the week ending September 6, 2012, down from last week when it averaged 3.59 percent. Last year at this time, the 30-year FRM averaged 4.12 percent.
  • 15-year fixed rate mortgages this week averaged 2.86 percent with an average 0.6 point, the same as last week. A year ago at this time, the 15-year FRM averaged 3.33 percent.
  • 5-year adjustable mortgages (ARM) averaged 2.75 percent this week with an average 0.7 point, down from last week when it averaged 2.78 percent. A year ago, the 5-year ARM averaged 2.96 percent.

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

“Mortgage rates were little changed over the holiday week amid mixed economic data releases. Although consumer spending rose 0.4 percent in July, representing the largest gain in five months, the core price index was unchanged suggesting little threat of inflation. Consumer confidence picked up slightly in August according to the University of Michigan, but remained below this year’s peak in May. And the manufacturing industry contracted for the third consecutive month in August.”

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.

Follow this link to view today’s MN and WI mortgage interest rates.

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Do You Qualify for a Mortgage?

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Do You Qualify for a Mortgage?

Minneapolis, MN: Every year, millions of potential new home owners ask the question, “can I qualify for a mortgage?” It’s a scary question for many people, but getting the answer isn’t anywhere as hard or difficult as people think.First, ask yourself some of these basic questions, then contact a local licensed non-bank lender and fill out an application. There are no obligations to let a lender review your situation.

Can I afford the payment?

This is obviously a major questions. I always tell people if they have been comfortably making a rent payment similar to what the anticipated mortgage payment will be, you’ve passed this test!Many people on the other hand have “payment shock”, which simply means the new home payment will be significantly more than what the pay now, if anything.

Lender use a term called “debt ratio”, which is simply a measure of a percentage of your income that would go towards the house, and all other debt. There are two different ratios they measure. The first number is your “housing debt”, which they don’t like to see over 28%. This is a measure of just the cost of the house {principal, interest, taxes, insurance) versus your income.  The next number, which most people are more familiar with is your “total debt ratio”, takes in all debt. The house payment, car payments, credit cards, student loans, etc. This number they generally do not like to see over 41% of your income.

There are slight variations to these ratios depending on loan program, so be sure to consult your Licensed Mortgage Loan Officer for details. Here is a link to some popular mortgage calculators to help you determine debt ratios.

Down Payment

Mortgage lenders love it when you put at least 20% down. That down payment size or more will get you a loan without mortgage insurance, a nice money saver. Realistically many people simply can’t afford that much. Conventional loans may be available with as little as 5% down, and the very popular FHA Loan is available with as little as 3.5% down payment.  The minimum down payment can also be effected by credit score.  Someone with a 660 credit score for example, will need at least 10% down on a conventional loan, while someone with a 720 score will only need 5% down.

Zero down payment is a potential option for some people. Military veterans can possible obtain a zero down payment VA Loan, and those seeing to live in rural areas of the country may also qualify for a no down payment USDA Rural Development Loan.

Your down payment will also affect your interest rate. All other things being equal, the best interest rates go to borrowers who put down larger down payments; you’ll pay a somewhat higher rate if you put down only 5 percent or 10 percent.

Credit score

Credit scores clearly are a major factor, but it is actually pretty simple. If you have great credit (over 720), you’ll have no problems.  If you have OK or average credit (660 – 720), you’ll likely qualify for most programs, but not necessarily all, or not with the best mortgage interest rates. If you have bad credit (below 620), you will not qualify for anything, and should work on repairing your credit before attempting to get a mortgage loan.

To review your credit go to www.annualcreditreport.com. You can get a copy of your report for free once every year. This service does NOT include scores. Another free option is http://www.creditkarma.com. This DOES include scores, but they offer similar, but not the actual FICO scores lenders use, so your numbers may be different than what a lender gets, but at least it gets you an idea of where you are at.

Your Income

To qualify for a mortgage loan, you will be required to fully document all of your qualifying income. Lenders want to see your past two-years job history. Do not confuse this with needing to be at the SAME job for two-years. It is OK if you’ve changed jobs.

If you’re self-employed, get commission, or tipped income, it’s another story. You’ll need to be at the same position for at least two-years, and provide the past two-years Federal Tax returns. Your income is based on your AFTER deductions. If your income is stable, or increasing, you’re in great shape.  If your income is declining, this may be an issue.

Income from child support, alimony, social security, pensions, etc, are all acceptable.  You’ll need to fully document what is is, and that you are actually receiving it.  You will also need to prove it will continue for at least three years.

Bottom Line

If you feel you meet these basic requirements, contact a local licensed Loan Officer to submit an application. Before you do, understand who you should contact, and some of the myths:

  • 80% of Loan Officers are unlicensed application clerks. Only deal with a licensed Loan Officer. Learn How.
  • Your Bank doesn’t know you or care about you
  • Credit Unions DO make a profit
  • Get off the Internet. There are no deals there you can’t get locally – Sit down with a LOCAL Lender

An original article by Joe Metzler (C) 2012 Metzler Enterprises, LLC for www.MnRealEstateDaily.com

Fannie Mae Delayed Financing Exception

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Have you ever paid cash for a home, then found out you need to wait at least 6 months to refinance it?

Well Fannie Mae has now come out with the Delayed Financing Exception.  You are now allowed a cash-out refinance within six months of a purchase transaction when NO Financing was used to purchase the property.  However, there are certain restrictions in order to qualify.  They are as follows:

  • The new loan cannot be more than the actual documented amount of the borrower’s initial investment when they bought the property, plus the financing of closing costs, preapid fees, and points (subject to the ltv, cltv, hcltv ratios).
  • Must have been arms-length transaction.
  • The purchase was documented with a HUD-1,which confirms that there was no mortgage financing involved to acquire the property.  The preliminary title report must verify the same.
  • The source of the original funds used to finance the property must be verified by bank statements, personal loan documents, HELOC, gift, 401k, etc).  Any loans used as the source for the purchase transaction (including gifts), will be required to be repaid and must show on the new HUD-1. ( Basically,  the funds from the new loan must be used to replenish or payoff where the funds came from including a 401k, hint hint).
  • All other cash-out refinance requirements are met and cash-out pricing is used vs rate and term.

NOT SO FAST:  Sounds great right?  Unfortunately, Fannie Mae doesn’t do loans.  They buy loans after the fact from lenders.  You need to find a lender willing to do this, and frankly, I don’t know a single lender that will allow you to refinance this way.

The bottom line:  Expect to wait at least 6 months to refinance after you paid cash for a home – no matter what you read online!.

 

USDA Refinance Funds Gone for 2012 – Purchase Money Still OK!

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USDA Refinance funds for fiscal year (FY) 2012 are now exhausted!

St Paul, MN: Have a USDA Rural Development loan?  Thinking of getting a USDA Refinance loan? Sorry – USDA announced today that they are out of money for refinances for 2012.

For the vast majority of homeowners, this really isn’t a big issue, as many of them can lower their interest rate and refinance into many other loan products.

Looking to buy a home? USDA Rural Development Purchase Loans on the other hand have plenty of money – so there is no need to worry if you are buying a home.

As a side note, the cost of a USDA home loan in going up slightly on October 1st, 2012. Currently the loans have mortgage insurance of .030%, and will be going up to .040%.  On a $100,000 loan, the old mortgage insure would have been $25 a month, and would now be $33.33 a month.

An original article by Joe Metzler (C) 2012 Metzler Enterprises, LLC for www.MnRealEstateDaily.com

VA Mortgage Loan Changes

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VA Mortgage Loan Program Changes

Since World War II, The VA home loan program has helped over 18 million veterans receive government-backed mortgages.  Recently the President signed into law some modifications to the VA home loan program.  This new bill will benefit disabled service members, single-parent soldiers and military widows. The new changes include:

Surviving  spouses of Veterans

Before the change, the only way military widows could participate in the VA no-down-payment program is if their spouse had a service-related disability or died in the line of duty.  As a result of the change, a widow may get a VA loans  if the veteran had a service-related disability for at least ten years before their death.

Single parents and military couples

When applying for a VA home loan, you have to sign a piece of paper saying that the property will be your primary residence and you will be the primary occupant.  Military spouses can take the place of military members serving abroad when signing this paper, but this doesn’t necessarily help single-parent soldiers and married military couples.  As a result of this bill, dependent children will be able to meet the occupancy requirement.  Active service members who don’t have children, unfortunately, will still be unable to meet the occupancy requirements.

Disabled veterans

Every VA loans has a funding fee. This fee is added to the loan amount, and the proceeds to go making sure the program will be self-sufficient and not cost tax payers any money. The fee varies by service, first time or second time use of a VA loan, or a VA streamline refinance.

Borrowers with a VA service-related disabilities of at least 10% have always been exempt from this fee.

Many times, Veterans often have to wait months to get their official  VA disability rating.  Thus they potentially may have to pay the VA funding fee when they shouldn’t have to.  With this improvement to VA mortgage loan program, the VA will be required to waive the fee after the pre-disability exam indicates the individual is disabled, instead of waiting months for the official “disability rating.”

Adjustable Mortgages

While most VA loans are the standard 30-year fixed rate mortgage, adjustable mortagegs were an option. Those ARM loans were scheduled to be cut out of the VA loan program by the end of 2012, but adjustable VA mortgages  will now continue to be available.

Veterans living in high-cost area of the country

Veterans who live in the most expensive areas of the nation were hit hard last fall when loan limits for government-backed mortgages dropped to $625,000 from $729,000.  As a result of this bill, higher county loan limits will be reinstated sometime in 2014.

 

 

95% of refinances are fix rate loans

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More Than 95 Percent Of Refinancing Borrowers Choose Fixed-Rate Mortgages

Thirty Percent Shorten Loan Term When Refinancing

In the second quarter of 2012, fixed-rate loans accounted for more than 95 percent of refinance loans, based on the Freddie Mac Quarterly Product Transition Report released today.

Refinancing borrowers clearly preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate.

News Facts

  • Of borrowers who refinanced during the second quarter, 30 percent reduced their loan term, while 67 percent of borrowers kept the same term as the loan they had paid off.
  • Eighty-one percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the second quarter, the highest share since the second quarter of 2010, while the remaining 19 percent chose to refinance into the same type of product.
  • Borrowers who refinanced under the Home Affordable Refinance Program (HARP) were more likely to take out a long-term, fixed-rate mortgage. For example, 25 percent of HARP borrowers shortened their loan term when they refinanced during the second quarter, compared with 30 percent of borrowers who refinanced outside of HARP. Further, 95 percent of borrowers who were refinancing out of an ARM under the HARP program chose a fixed-rate mortgage. In contrast, borrowers who had an ARM, but did not refinance through HARP, about one-half opted for another hybrid ARM.

Rates for the week

  • “Fixed mortgage rates averaged 3.79 percent for 30-year loans and 3.04 percent for 15-year product during the second quarter in Freddie Mac’s Primary Mortgage Market Survey®, well below long-term averages and the lowest quarterly averages recorded in our survey. The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.0 percent during the second quarter of 2012. It’s no wonder we continue to see strong refinance activity into fixed-rate loans.
  • “Compared to a 30-year fixed-rate mortgage, the interest rate on a 15-year fixed was about three-quarters of a percentage point lower during the second quarter. For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Further, a shorter-term, fully amortizing loan reduces the loan balance faster and builds home equity sooner.”

Freddie Mac’s survey is the average of loans bought from lenders last week, including discount points. Follow this link to view today’s MN and WI mortgage interest rates.

 

Mortgage closing costs up because of government rules

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Closing costs have NOT gone down!

St Paul, MN:  Recent news releases from the government have been claiming that mortgage closing costs have gone down 7% due to new mandated government procedures that make it necessary for lenders to be more accurate when making estimates for borrower’s closing costs.

The spin masters are wrong on two fronts.

First, most lenders were already accurate in their initial closing cost disclosures, and the items that caused them to re-adjust their estimate later on are still there.  The only significant difference is the incredible burden of new paperwork, and disclosures that make absolutely no difference to the customer, or their bottom line.  For example, the old easy to read and understand one page Good Faith Estimate has been replaced with an incredible confusing three page Good Faith Estimate. The new form has been so badly received, that the Consumer Financial Protection Bureau is already working on a new form to replace the new form! Furthermore, re-disclosing forms for minor changes with mandatory wait times before a client can close on their loan has done more harm than good, and has significantly increased lender costs, turn times, and client frustration.

Secondly, due to the new rules, industry insiders have proven that closing costs have actually risen about $1200 per client.  Where the government spins it is that under the new rules, lenders are now forced to give home owners more “lender credits towards closing costs”. This sounds great, and it does actually lower the OUT-OF-POCKET average closing cost for many people. But, what is actually happening is that the client now has reduced options, and is being forced to pay more over time with a higher interest rate in exchange for those lender credit.

The bottom line?  Don’t be fooled by the spin. The government has mandated more rules, more paperwork, and less consumer choice all while claiming victory in reduced costs. The reality is it cost consumers significantly more in a higher mortgage interest rate over the length of the loan than they ever saved in initial closing costs.

USDA Loan Eligibility Map Changes effective Oct 1, 2012

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USDA is changing the property eligibility map effective Oct. 1, 2012.

Cities and towns that formally qualified for the Zero Down USDA Rural Development Loans may no longer qualify.

This change is due to a number of reason, including larger populations, elimination of special consideration zones, or they no longer meet the definition of rural.

The effected cities in MN are listed here.

Click this link to view the full list of cities across the county that are losing their ability to get a USDA Rural Development loan.

 USDA INCOME Eligibility Check
USDA Property Eligibility Check