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You DON’T need 20% down to buy a home!

Do I need 20% down payment to buy a home?

I saw it again on the news this morning.  Some talking head “Real Estate Expert” was telling the national audience that lenders require 20% down payment.

Generally speaking, this couldn’t be further from the truth, and needing 20% down is a huge misconception in the marketplace today. For the average home buyer, there are numerous options for obtaining financing with less than 20% down.

DON”T ASSUME! Contact a local licensed mortgage loan officer and let them professionally review your individual situation. Click here to learn how to shop for a lender.

NO DOWN PAYMENT OPTIONS:

VA Financing – Here is a big thank you from the government. As a Vet, you are eligible for zero down payment, 100% financing on a home purchase. You either need to be an active or honorably discharged member of the armed forces or national guard. The seller can pay your closing costs and there is no mortgage insurance, saving you a lot of money monthly on your home. Click here for more information on VA home loans.

USDA/Rural Development – The Guaranteed USDA program offers zero down payment 100% financing for qualified borrowers purchasing a home in a rural area.  There are many locations just outside of major metropolitan areas that are eligible for this program.  The program has household income restrictions for their program, so Click here to see if the area you’re looking is USDA Rural Development eligible and if you income qualify.

LOW DOWN PAYMENT OPTIONS:

FHA Financing – FHA offers home loans with as little as 3.5% down.  FHA has no income limits for the household, but does have loan limits, based on the county in which you are purchasing the home.  Click here to check on the limits for your area.  FHA is one of the more lenient programs in regards to qualifying, and the down payment can be received as a gift from an eligible source (parents, state or local program, etc).

Local and State Bond Money Programs – Many states and even some larges cities have down payment assistance programs that can be used in conjunction primarily with an FHA loan. These programs vary widely, but if available in your area, are a great tool for those who qualify. Contact a local lender to inquire what programs may be available in the area you want to buy a home.

Conventional Financing – Fannie Mae and Freddie Mac both still offer programs with as little as 3% down.  For example, FannieMae offers HomePath financing on eligible FannieMae foreclosures.  For those with acceptable credit, many conventional loans are available with just 5% down.

WHO NEEDS 20% DOWN?

  • Investment properties typically require at least 20% down
  • JUMBO loans, which are loans generally over $417,000, generally require at least 20% down

Shopping for a mortgage loan? Beware of bad lenders, bait-n-switch, and outright fraud

Are you searching for the lowest refinance mortgage rates?

Have you shopped and think you’ve found the lowest refinance mortgage rates and closing costs?

Are you sure you found a deal, or did you find the crooked bait-n-switch lender?

A lot of consumers like to “shop around” to find the best interest rate they can for their loan. As a result, white lies, factual omissions, and out-and-out misleading statements are commonplace among loan officers in today’s insanely competitive lending market. That’s why it’s important for you, as a consumer, to understand the classic bait-and-switch technique of many lenders and loan officers. It’s basic economics—if a bank or lending institution offers consistently uncompetitive interest rates, they won’t make any loans and they won’t make any money. Last time I checked, mortgage lenders and banks are not charitable organizations. What does this mean for borrowers? This means that if one lender is quoting you significantly better than everyone one else, buyer beware!

Bait & Switch is alive and well and still living in the mortgage industry, especially from the big online internet lenders. Wasted time, lost real interest rates, and money spent on upfront fees are some of the costs of dealing with the wrong lender – and that is if you DON’T use them.

THE REALITY: Shop til you drop. All mortgage lenders are basically the same. They all get their money from the same sources, the interest rates are based on the same bond market, transfer the loan to Fannie Mae Freddie Mac or FHA, and the third parties fees they need to collect and pass through (appraisal, credit report, underwriting, title company, etc) are all the same. True mortgage interest rate differences will never be more than 1/8th (0.125%) to 1/4 (0.25%) difference between all lender across the country.

THE GAME: If lenders advertised “We are the same as everyone else”, who would you use? Therefore the game is to capture your attention and get you to call them. This is done primarily with two claims.

  • Super low rate. To quote the super low rate, these bad lenders usually are hiding in discount points and other fees in order to buy down the interest rate they are quoting, or the small print says you need a credit score over 800 something.
  • Super low closing costs. To quote super low closing costs, they simply forget to tell you how much higher the interest rate will be to offset those low closing costs.

Here’s a classic example of how it works at the less-than-respectable mortgage company or bank. The bank simply takes advantage of YOUR IGNORANCE when you’ve “shopped” for the best mortgage rates.

The company (or loan officer) scans today’s REAL interest rates and sees that they can realistically offer a 4.25% rate at par (no points paid by borrower) and they know this is approximately what the competition is offering. The lender see’s that if the borrower pays 2.25 points (2.25% of the loan amount), the borrower could get a 3.75% interest rate. So the loan officer or the companies automated web site quote system will tell a consumer that is shopping interest rates that he can do 3.75%. Beating all others. The lender tells the client they can’t lock the interest rate until they get an appraisal and all their documents.

Excited, the borrower believes he or she has found a diamond in the rough and agrees to do business with that lender. The lender asks for the borrower’s credit card information and takes a $500 deposit for the appraisal and gets started. The borrower sends in all their documents.

Awesome… You think you are getting an amazing deal.  A week later, the appraisal has already been done, and your paperwork shows up to be signed.  Wait a minute. The closing costs are nowhere near the original quote.  Usually thousand of dollars higher. Then when the client is ready to lock his or her interest rate, the loan officer apologizes and says that the 3.75% rate is no longer available because interest rates have changed since the quote was made (the lender is not legally obliged to give any interest rate until a GFE has been produced and a rate lock has been entered into).

Pissed off borrowers usually at this point start calling other lenders again, only to find out that they are all quoting about the same as the company they are already working with is now really quoting. Since the borrower has already paid a $500 deposit, has made a tedious loan application, and has likely already produced documents for processing and underwriting, the borrower almost always grudgingly accepts that rates have simply risen and agrees to finish the loan process with that lender.

The classic bait-and-switch. Mislead the person shopping, rope him in with a ridiculous rate quote, and lock the person in with a substantial deposit for an appraisal. This bait-and-switch tactic is used thousands of times each day by lenders nationwide. 

CLUES: Most people don’t find out they are working with a predatory lender until well into the transaction, and usually after they’ve spend money on an appraisal, or non-refundable application fee.  There are some clues to look for:

  • Requiring up-front money other than appraisal or a small amount for a credit report
  • Not being able to lock your interest rate until AFTER you send in paperwork and the loan is approved
  • Relying on ANY ONLINE SYSTEM that gives you any rate quote as a real quote

AVOID THE PERILS of mortgage rate shopping with a little homework.

  • Get off the internet. No internet lender has anything better than the mortgage company down the street
  • Google the name of the company plus the word fraud or scam. What do you find?
  • Contact a local lender with an office you can drive to and do business with them.
  • Check their reputation. Not just their advertised interest rates.

Want to see something scary? All over the internet are advertisements for amazing interest rates from an internet company called AmeriSave. Best mortgage rates anywhere that completely blow away the competition.  But before you jump, read this about them, and take my advice to Google their name plus the word fraud. Still want to work with them?

 

What are you actually buying, a townhome or a condo?

What are you buying, a condo or a town house?

Looks like a townhome, acts like a townhome – but its a condo, and that makes a big difference in mortgage financing!

People, including many Real Estate Agents, mistakenly assume a property legally platted and developed as a condominium is a town house. In the mortgage financing industry, there is a difference in both interest rates, and the time and ability to get a loan for a condo versus a town house.

Minnesota Mortgage Broker - Best Interest rates - Condo financingWhen you buy a home, there are two major aspects:

  1. The lender “credit qualifies” the buyer
  2. The lender “qualifies” the home with an appraisal.

What many people miss is that if you are buying any property with an association (townhome or condo), the lender also has to qualify the association.

A townhome, often referred to in the industry as a PUD (planned unit development) is much easier to get approved, and the interest rate the buyer receives is usually the same as a single family home.

A condo on the other hand is much different. The interest rate depends on the down payment, number of stories, and a few other factors. It is usually 1/8th (.125%) to 1/4 (.25%) HIGHER than a single family home. Furthermore, the process to approve a condo association is much more complex, takes significantly longer, and usually requires the buyer to pay $200 – $300 in additional fees to get the documents from the association the lender needs to approve the loan.

Should this scare you away from buying a condo?  Of course not.

Financing rates and options depend on your knowing … Condo or Townhouse?  Does your mortgage lender know the difference?  Does your agent?  Do they take the time and make the effort to find out?  If not, you’re working with the wrong person …

You can save a lot of headache and hassle down the line if you know the rules, and if you are working with a Realtor and
Mortgage Loan Officer who understands the differences, and can properly guide you along your way to a
successful home purchase.

Shopping for a mortgage? Protect yourself from bait-n-switch, scams, and predatory lenders

Protecting yourself against predatory lenders, mortgage scams, and Loan officers screw-ups

Mortgage rates are amazing. That’s great news for veteran loan hunters.

But for inexperienced shoppers who don’t watch their backs, the mortgage business can still be a scary place to travel.

The internet especially has make it easier for sly lenders to mislead and take advantage of naïve consumers using any number of tricks, from quoting bogus rates over the telephone to slipping gratuitous costs into their loans. To avoid these problems — as well as other trip-ups posed by the confusing mortgage process itself — consumers have to brush up on their mortgage shopping skills.

Market is ripe for tricks and trip-ups
In the past few years, when the market was hot, a lot of rookie Loan Officers and small brokers came into the market that may not have the experience level you’re comfortable with. There was money to be made, and it was easy. Just sit back, and the phone will ring with customers wanting to refinance. The number of lenders and Loan Officers TRIPLED from 2001 to 2005. Lending volume also TRIPLED to the highest numbers in history!

Since the mortgage market meltdown, which really kicked into high gear in mid 2007, mortgage volume is down dramatically, and many companies are desperate to stay in the business. They will say and do anything to capture a deal.

The reality is that most lenders and brokers aren’t out to fleece customers and the complexity of the home loan process — rather than anyone’s malfeasance — takes the blame for some of the obstacles consumers face. Many trip-ups don’t rise to the level of “predatory lending” either, regardless of what the media claims. Nevertheless, they can cost borrowers serious time and money, and guarding against them becomes even more important during the boom times.

There’s kind of a range of games that get played and they’re pretty broad, from fairly benign stuff to outright fraud.

Problems can pop up long before a borrower fills out any paperwork. Indeed, just finding out how much a mortgage closing costs can be confusing, especially when looking at the new Good Faith Estimate when you are used to the old Good Faith Estimate.

Be as specific as possible
Many potential customers simply call lenders up and ask, “What’s your rate?” But they fail to indicate what kind of loan they need, how long of a lock period they want, how many discount points they’re willing to pay, how long the rate is good for or anything else. Consumers have to specify all of these things or lenders can pretty much say whatever they want, then provide different figures when the customers come in and blame the lack of specificity.

A loan with a lock period of just 15 days, for instance, usually has a lower rate than one that a consumer can lock in for 60 days. Most consumers opt for loans with longer locks because they need more than two weeks to close. But loan officers sometimes quote rates on their shortest-lock loans over the phone or in print just to sound cheap, knowing full well that many callers will never be able to obtain those loans. Companies can provide interest rates that include several discount “points” to make their rates look better, even though most of our customers either can’t or don’t want to put down several thousand extra dollars at closing for “points” to lower the interest rate.

In most of newspapers, once a week or more, they’ll have a list of rates by lender. But frequently you’ll find the rates they put in the paper were rates that were really never available. They kind of low ball their rate. When you come in, they’ll tell you the market has moved and the rates are now higher. They get away with this because the rate they list in the Sunday paper is usually submitted on Thursday. You read the paper on Sunday, then call the lender on Monday…

Figure in the fees
Borrowers often forget to ask about fees, and don’t compare lenders based on their closing costs. That allows companies to pad their bottom lines by adding “processing fees” and other miscellaneous charges to the loan at closing. Lenders don’t control certain fees for services provided by third parties, such as title searches and appraisals. But they can adjust their own fees.

Don’t believe everything you read
It’s a competitive business. Lenders understand this, so creative advertising is everywhere. Consumers need to watch out for advertising tricks, too. Companies have been plugging “no cost” refinance loans lately, but the tagline really means “no out-of-pocket costs at closing.” Borrowers pay higher rates on these mortgages and lenders use the extra money to pay the costs themselves. There is no such thing as a no closing cost loan!

The annual percentage rate, or APR, found in advertisements can be misleading as well. Mortgage lenders don’t always include all the fees they charge in the calculation that determines APR, so customers who use that figure to shop rather than an itemized breakdown of rates, points and fees may end up comparing apples to oranges.

Of course, it’s difficult for borrowers to compare fees when they don’t know what they are. By law, lenders and brokers don’t have to give what’s called the Good Faith Estimate document to customers until three days after they apply. But there’s nothing preventing shoppers from asking for it before committing to anything. Reputable lenders will provide one. Please read my article- Beware of the Bad, Good Faith Estimate, so you know what to look for when you do get your estimate!

Banker, Broker, or Direct Lender. All are “Loan Officers”, so who is best?
When you’re looking to get a mortgage loan, you may work with a loan officer, but where they work makes a difference! People often confuse the lender types even though all will glean the same results: a home loan. However, it is important to understand the difference between the three types of lenders so you know what to expect from them during the mortgage application process.

Currently the industry is seeing the biggest problems with loan officers exactly where most customers wouldn’t expect. The big banks. Why? Most states have enacted strict guidelines for non-bank lender and brokers. These include criminal background checks, mandatory education, stricter underwriting guidelines, mandatory disclosures, and more. BUT, state banking laws can not trump federal banking law. Federally Chartered Banks (all the big bank names you know) only have to follow less restrictive federal law. Basically they get to do whatever they want! Thanks Washington!

  1. All Loan Officers are required to have an NMLS number (Nationwide Mortgage Licensing System and Registry). This gives the FALSE APPEARANCE of bank loan officers having a license.
  2. Bank employees are NOT required to have background checks, do not need any state or federally mandated up-front or ongoing education, and do not have pass any state of federally mandated tests to be a loan officer.  They could have been flipping burgers yesterday!
  3. All NON-BANK Loan Officers MUST have a personal license.

Know the score
After customers apply and have their credit scores pulled by their lenders, they should ask for those too. Companies have no obligation to share them, but those scores often dictate whether borrowers get loans and how much they have to pay for them. Customers who obtain their scores can get rate quotes tailored to them, rather than receive quotes that may apply only to borrowers with better or worse credit.

If I would say at the application stage to my lender, “Hey, when you pull my credit report, will you tell me what my scores are?” and he said no, I think I would go somewhere else. Why not go with somebody who is willing to tell you? You need to know.

Last-minute maneuvers
Closer to closing, borrowers also have to watch out for counteroffers from their current mortgage lender. When borrowers refinance their loans, their new lenders request “payoff letters” from their old lenders. These letters spell out exactly how much the old lenders are entitled to at closing and are often the only indication that a borrower is refinancing.

To avoid losing customers, lenders who are about to get the boot sometimes swoop in and offer to lower their borrowers’ rates or refinance them into new loans themselves. While the offer may sound competitive, they almost always are aren’t so.

Another source of confusion is the assumption that your current lender can do a loan for lower fees. The vast majority of the time this is NOT true. Loans are ‘packaged’ to be resold. The vast majority of lenders resell their loans and therefore any changes to the original loan require a complete new package, new closing, new note, new closing costs, new appraisal, new everything, etc. Plus, they usually come very late in the process. Borrowers who accept them can end up having to forfeit application fees or other monies to the lenders they planned on using.

By learning about all of these miscellaneous traps, consumers can take advantage of today’s lower rates and refinance without worrying about being taken for a ride. After all, experts say, preparation is the best defense against shady lending practices.

It comes back to education. If I’ve called five respectable lenders – I know about what rates and costs are. It’s going to be pretty easy for me to know whether one lender is pulling the wool over my eyes.

How do you know if they are are respectable lender? Read “How to Shop for a Lender” for some good clues.

One final word of advice. OUT STATE INTERNET LENDERS, NO MATTER WHAT THEY CLAIM, can NOT offer you anything you can’t get from the local lender down the street. These out state lenders are by far the worst in terms of misleading quotes, miscellaneous traps, and shady lending practices as they have no connection to the community YOU live in.

Need a great lender in MN or WI?  Apply HERE. Have an answer in a few hours.

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Mortgage Payment Calculator App

Wouldn’t it be nice to have a handy Mortgage Calculator App on your phone to quickly calculate payments while out looking at homes
or figuring out a refinance payment?

Realtors, wouldn’t it be nice to quickly calculate a payment for the client?

Never again will you have to guess your monthly payment when you’re shopping for homes because you can calculate your payment on the spot…even if you’re in the house you might want to buy! This calculator gives you the confidence you need to make a decision on the affordability of any house.

Install this Complimentary Smartphone app now to eliminate uncertainty that surrounds buying a home and pin point your monthly payment with laser-like focus.

What came first, falling home prices or a slumping market?

What came first, falling home prices or a slumping market?

Chicken or the Egg?

St Paul, MN: While pundits galore will claim many different views, the answer is rather simple in economic terms. After years and years of record home price increases, the market simply couldn’t support the increases anymore. Buyers could no longer afford the prices. House prices started falling first simply because no one was willing to pay the price anymore.

Most loan programs like to see debt ratios no higher than around 40% of income. FHA for example is 43%.  Simple economics apply here. If the average wage in Minnesota is $784 per week ($40,784 per year), assuming no other debt (not likely), 5% down, PMI, taxes and insurance, this person could buy around a $180,000 home. Start throwing in debt, car loans, credit cards, etc., and the maximum home price starts sinking as fast as a rock in water.

As home prices increased, buyers started switching to high risk, short-term loan products to make homes more affordable. As we can see by today’s market, that was a short sighted plan that didn’t work out well for many.

Therefore there really is only one way to get demand up and people to start buying again. Affordable home prices. Simple supply and demand economics. Too much supply because of too little demand forces prices to drop. As unsold inventory clears, higher prices will return (but fewer sales).

Starting around 2000, the normal supply and demand cycle was dramatically upset as people threw caution to the wind and kept demand artificially high. Everyone wanted in, and they were willing to pay whatever price was asked. Everyone figured you could make a killing in the housing market. This was especially evident in the investment property market.

A killing has occurred. Just not the one most people expected as the house of glass broke in 2007.

So what do we do now?

BUY A HOME! Housing affordability has returned for most people, interest rates are near historic lows and there are deals to be had everywhere. First time home buyers should be running in masses to buy a home!

Winning or losing – How to play the Mortgage Interest Rate Game

Mortgage interest rates — just like stock prices — change price daily and you can win big or lose big if you don’t know what you are doing.

#1 Mortgage Interest Rate and Lender Shopping Tip | MN and WI Mortgage Rates | Quote, Float, or Lock? |

For the home buyer that is “shopping” for a mortgage, or waiting for rates to fall, or just “hasn’t gotten around to it”, we suggest you almost always lock, and to do it quickly. The sooner you lock your rate, the less chance you have of losing in the Mortgage Rate game.

If you are refinancing, you can gamble a bit more, but if you have a signed purchase contract in hand, lock your rate as soon as possible.  There is no better way to protect yourself from the fickle mortgage markets. Holding out for 1/8th – 1/4% more is just not worth the risk! If you want to gamble… go to Vegas.

What is a Rate QUOTE? When buying a home or refinancing, it is common to call around to many lenders to get a rate quote. A quote is not a guaranteed rate. Another common issue with getting a quote is you often get one from Lender A on Monday, Lender B on Tuesday, and Lender C on Wednesday. Rates can change daily, sometimes multiple times, so unless you get all your quotes at the same time, you don’t have accurate information. THE ONLY QUOTE THAT MATTERS IS THE DAY YOU LOCK. Many lenders quote you low to get you to stop shopping, knowing that you will usually NOT be locking the same day of the quote – especially for any purchase loans. Be wary of anyone significantly lower than anyone else.

What is a Rate Lock Period? The lender will usually quote rates along with a rate lock period, usually 15, 45, or 60 days. The loan must close within this period. The longer the rate period, the higher the interest rate.

What is a Rate Lock? When you “LOCK” your interest rate with your lender, you and the lender agree this is the guaranteed rate you will receive, and that no matter what the markets do before closing, you will not be charged a higher rate if rates go up, and you will not be able to get a lower rate if rates go down. Your rate lock should be in writing.

What Does It Mean to Float? Floating your rate means means that while your loan is in progress, the rate is NOT yet guaranteed. You are taking the risk that interest rates will either not go up or that they will fall. If rates have been dropping, then you might want to take a chance that rates will be lower by the time you close your loan than they are today. Discuss the floating with your Loan Officer. Sometimes it is worth the gamble, sometimes it isn’t.

Dont worry about credit inquiries when shopping for a mortgage loan

Shopping for a mortgage loan? DON’T worry about inquiries on your credit report

We’ve all heard it before. Having someone pull your credit will reduce your credit score. Sadly, many people end up making some poor decisions based on half truths, and bad information.

The fear of reduced credit scores with the occasional pull from a creditor is the most annoying, misleading, and misunderstood thing I hear every week in the mortgage business. If you are worried about “inquiries on your report”, this isn’t the concern most people think it is.

What to know about mortgage rate shopping.
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring.  So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.  In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period was any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span.

Furthermore, inquiries, even under the worst of situations, could only account for 10% of your overall score. Most people should have absolutely NO CONCERN whatsoever about inquiries on your credit report unless you have applied with 10, 15, or even 20 lenders in the past 90-days.

Visit MyFico.com to find out the truth about inquiries and your credit score, and STOP WORRYING!

 

What is the value of my home?

What’s the value of your home? (MN & WI Only)

St Paul, MN: Many homeowners are curious about the appraised value of their home in today’s market. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, it is important to have an accurate idea of what your home is worth.

There are many sites that claim to give you are idea, including Zillow, Trulia, and more.

The problem is, where is the data coming from and how accurate is it?

We have a different tool to answer the estimated appraised value of your home question. Our application uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, it can be a useful tool to gauge fluctuations and trends in your market which affect your home’s value.

Check your homes value? (MN and WI homes only)

For best results, contact us. I can help with purchasing a new home, or refinancing your existing MN or WI home, get you pre-approved for a new home, or put you in touch with a GOOD Real Estate Agent to help determine the best asking price for your home. We know the particulars of your neighborhood, the value of homes, and can help you discover what your home may really be worth.

There are differences in Loan Officer qualifications. Know how to tell who you are working with

Is your Loan Officer Licensed, or simply registered? There is a BIG difference YOU need to understand

Recent changes to the lending industry requires all loan officers to have a tracking number, known as an NMLS number (Nationwide Mortgage Licensing System and Registry). It should be displayed on their business cards, E-Mail, web sites, all correspondence, and most loan documents.

The display of the NMLS number may make many believe the Loan Officer is licensed. Sadly, this isn’t true, and working with an unlicensed, untrained Loan Officer can cause you many headaches and hassles.

Simply put, Loan Officers at Banks, most Credit Unions, or Mortgage Companies owned by a bank are NOT REQUIRED to be licensed, take classes, pass any tests, take continuing education, or pass any state or federally mandated tests to be a Loan Officer!

CHECK YOUR LOAN OFFICER OUT on the Nationwide Mortgage Licensing System and Registry at http://www.nmlsconsumeraccess.org

My NMLS # is 274132

It is hard to determine if the Loan Officer is simply registered, versus licensed. When looking up a loan officer, you have to go to the bottom of their NMLS identification page and look under State Licenses/Registrations or Federal Registrationheading.

  • A LICENSED Loan Officer will say “State Licenses/Registrations” and will have one or more STATES listed with licensing information.
  • An UNLICENSED, but simply REGISTERED Loan Officer will say “Federal Registration” and the something like Federal Mortgage Loan Originator.

Who is Best? Banks, Brokers, or Direct Mortgage Lenders?

Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences between Loan Officer training. As the new requirements have been rolling out across the country, many Loan Officers who have been unable to meet the new licensing and testing requirements, and especially those who have failed the new tests, have simply gone to the large banks to work.

Calling “1-800-Big-Bank” to get a loan??? YIKES. Here is a chart to show the differences:

SAFE ACT Loan Officers
(MLO’s)
Bank Loan Officers (RMLO’s)
Have Personal License Yes No
Registered in NMLS Yes Yes
FBI Background Yes No
Fingerprinted Yes No
Surety Bonded Yes No
Pre-Employment education Yes No
8 hours continuing education each year Yes No
Personal Credit checked Yes No
Pass Tough State Test Yes No
Pass Tough Federal Test Yes No
Complaint mechanism’s Yes No
Licensing fees and renewals Yes No
Loan Officer Designation MLO RMLO
NMLS = Nationwide Mortgage Lender System and Registry (Tracking Number)
MLO = Mortgage Loan Officer (Licensed and Trained)
RMLO = Registered Mortgage Loan Officer (simply registered)

I think the choice is clear. Who would YOU rather be working with on the largest financial transaction of your life? A fully trained, licensed, fingerprinted, and background checked Loan Officer – or the untrained, unlicensed, and simply registered Loan Officer at the bank?

The funny part is the cost for the service based on rates and fees are usually about the same, if not slightly cheaper in both rate and costs. Plus non-bank lenders usually close the loans faster, and have more knowledgeable and experienced Loan Officers.

The best S.A.F.E. ACT Loan Officer (non-Bank) analogy I can use is having a choice of working with an experienced CPA to do your taxes vs. you using Turbo Tax to do it yourself, but paying the same price.

Finally, THIS IS A CLEAR REASON why people should follow my #1 mortgage shopping rule: GOOGLE THE NAME OF YOUR LOAN OFFICER before allowing them to handle the largest financial transaction of your life!

USDA Rural Development loans to have PMI

USDA loans in MN and WIIt is hard to move the economy, and especially the housing market forward when they keep making it more difficult and expensive to buy a home..

The USDA Rural Housing Loan will implement a new Annual (monthly) Fee of 0.30% charged on all loans with a Conditional Commitment issued on or after October 1, 2011. This fee will be added to the borrower’s monthly payment and will remain for the life of the loan.

One of the (now former) great benefits of the Rural Development Loan was the lack of mortgage insurance.

The initial Annual Fee, for the first year of the loan, will be calculated based upon the guaranteed loan amount (initial loan). For the remaining years of the loan, the Annual Fee will be calculated on the average annual scheduled unpaid principal balance of the loan, not the actual unpaid principal balance.

The good news is the Upfront Guarantee Fee will be reduced from 3.5% to 2% for purchase transactions. This fee can be financed into the loan amount with an LTV up to 102% or paid in cash.

The Upfront Guarantee Fee for refinance transactions will remain at 1%.

FHA 203k fix up loan in MN

Found that dream home… but it needs a little work? Is it a fixer-upper?

The purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.

The FHA 203(k) program can help you with the purchase or refinance of a property by allowing you to roll-in the costs of repairs and improvements up to 110% of the after improved value of the home with a minimum 3.5% down payment.

Download 203k handbook

 Who does 203k loans in MN?

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FHA says “Don’t raise down payment requirements!”

FHA Argues Against Raising Downpayment

The Department of Housing and Urban Development is urging Congress not to raise the minimum downpayment on FHA mortgage loans, saying that downpayments are not the best indicator of loan defaults.

The current requirement is at least 3.5% of the purchase price for FHA downpayment.

Testifying before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, Acting Assistant Secretary for Housing/FHA Commissioner Carol Galante warned that a legislative proposal to raise FHA’s minimum downpayment requirement to 5 percent would forestall recovery in the housing market and restrict access to credit for worthy borrowers…

CLICK HERE TO READ THE FULL STORY

 

FHA Loan limit changes effective Oct 1, 2011

NEW FHA loan limit guidelines go into effect on Oct, 1, 2011. Don’t be caught
not knowing the new limits. Watch the video.

Click here to search County Loan Limits in Minnesota and Wisconsin and all of the country

FHA Mortgagee Letter explaining the changes

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Buying a Condo and need financing, beware of some extra steps

Many buyers in the Minneapolis St Paul, along with Duluth, Rochester, and throughout all of MN qualify for FHA financing. FHA is the government backed loan program that allows for just 3.5% down payment. With the changes in the mortgage industry, if you are buying a CONDO, there are extra step and rules you need to be aware of.

When buying a home, lenders approve the buyer, and approve the home. When buying a town home or condo, lenders also have to approve the Association.

Without bothering you with the details, the purpose of this post is to simply make you aware of the extra approval process, and to let you know this additional step can potentially cause a loan denial, but usually just involves a much longer loan approval process.

Everyone using FHA financing to buy a condo should check to see if the condo project is on the FHA-approved (HUD-approved) list. This is an absolute must-read for you! If you want an FHA loan, you can only buy in condo projects that are approved by HUD (the Department of Housing and Urban Development).

HUD has recently made available online a list of the condo projects that are already approved. Before I show you how to access the list, know two things:

(1) If a condo project is on the list, it must still be checked by your lender to make sure it still meets HUD’s requirements (for owner/occupancy ratios, etc.)

(2) If a condo project is not on the list, your lender needs to go through a long process to get it approved. This potentially could delay your closing, or even result in a loan denial if the condo project isn’t ultimately approved. At the least, you should check to see if the project is approved before making any offer on a condo, then ask questions as to why it is not approved.

Condo’s in unapproved projects typically are offered at below market prices because of the inability to get financing. Many of these units are only able to be bought with cash.

Here’s how you check FHA approved Condo list:

(1) Go to HUD’s website at this link: https://entp.hud.gov/idapp/html/condlook.cfm.

(2) Fill in the blanks as they pertain to your condo search, and click the ‘send’ button at the bottom of the screen.

Finally, understand with the additional burden on FHA condo financing, you need to make sure you are working with an NMLS Licensed Loan Officer who understand the additional complexities to make your purchase smooth and stress free.

New Appraisal Rules starting in Sept 2011

Appraisals are changing again.

Fannie Mae and and Freddie Mae have decided to change the way appraisers describe the quality and condition of homes.

Appraisers have always described properties as being: Good, Average, Fair or Poor – sometimes adding “very good” or “excellent” or fudging with “low-average” or “average-” – knowing that a lower condition or quality review of the home as fair or poor – you probably killed the deal.

Going forward, appraisers will need to define condition on a C1 – to – C6 scale and quality on a Q1 to Q6 scale.  1 is considered the best – for condition a new or unlived in dwelling.  A C6 condition is a property with substantial damage or other major maintenance issues.

For views, appraisers will need to use the following codes: A, B or N — what do they mean: A = adverse (hurts value or marketability); B = Beneficial (that’s good) and N = Neutral.  and if it is a view lot – how about B;MTn;Wtr — what?  Are you confused yet?

Now if you have 2 and 1/2 baths the correct way to show the count will be 2.1 and if the house has 2 1/2 baths = 2.2

For Kitchens and baths we will need to report if they have been “updated” “not updated” or “remodeled” and if the work was done in less than 1-year; 1-5 years, 6-10 years, 11-15 years ago or unknown.  An updated bath might have a new toilet, and remodeled bath an all new shower.

The change is designed to give more specific information. By using numbers, and not wiggle words like “average”, will help in underwriting loans.

The worse news is, homes rated Q5 and Q6 will NOT be allowed to be sold on the secondary market.  So if an appraisal comes back as a Q5 or Q6 (something few of us will know in advance), the loan likely will be denied by your lender.

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