Why free credit report scores are not accurate

Why free credit report scores are not accurate

Minneapolis, MN:  As a mortgage loan officer, every single day, someone tells me their credit score they received from Credit Karma, some “free credit report” web site, their Discover Card statement, or even directly from the actual credit reporting agency.

Everyday, I tell them that is NOT their correct mortgage credit score.

We jokingly call those score your “Fake ‘O’ Score”  – (joke for FICO score)

Why isn’t my credit score my credit score?

It is actually rather simple. There are multiple credit score models, and the models vary by what you are doing.

Your Credit Score

When you apply for a credit card, the credit card company cares most about how you handle credit cards, and the likelihood of you defaulting on a credit card. Like wise, when you apply for a car loan, the scores are based on the likelihood of you defaulting on an auto loan. The same holds true for mortgages loans.

When you obtain your credit score from ANY SITE that YOU as the consumer are able to get your credit report, you are getting a GENERIC score.  That is, a score NOT based on any one industry risk factor.

It is very common for mortgage lenders to pull scores that are 20 points, even 30-points lower that you just saw on one of those other sites…. and NO, it isn’t because we pulled your credit!!  That truth about inquiries NOT lowering your score is for another article

 


USDA to lower mortgage insurance costs

USDA to cut loan mortgage insurance costs

The USDA Rural Housing home loans will soon get  cheaper for homeowners with lower mortgage insurance costs.

USDA Rural Development LoansUSDA announced last month that it was lowering its upfront mortgage insurance premium fee to 1 percent of the total mortgaged amount, down from the current from 2.75 percent. This amount is added to the borrowers loan.  So someone today borrower needing a $100,000 loan would actually have a $102,750 loan. Under the new guidelines, the same borrower would have a $101,000 loan.

The monthly mortgage insurance on a USDA loan will also be reduced from the current .50% to just .35%.  On that same sample $100,000 loan, this means a monthly mortgage insurance drop from $42.84 a month to $29.99 a month.

The change becomes effective Oct. 1, 2016, and will bring the fees and insurance premiums down to pre-recession levels.

The agency said that the cuts were possible because of the bulk of the mortgage and housing crisis is over, and foreclosure rates have fallen to back to more traditional numbers.

Learn more about USDA rural housing home loans in MN, WI, and SD.


Consumers disqualify themselves for home loans

Consumers Misjudge Max Debt-to-Income ratios… and Disqualify Themselves from home loans

According to a survey by Fannie Mae’s Economic and Strategic Research Group, many consumers think it’s difficult to get a mortgage in today’s market.images98735

And forty five percent of those respondents cite too much existing debt as a top reason. Yet, in that same group, more than half don’t actually know the maximum debt-to-income ratio (DTI) required by lenders.

The result — potential buyers may be wrongly disqualifying themselves before they even apply for a mortgage.

That’s why it’s key to provide information, resources, and tools to educate consumers on the mortgage process, and any perceived barriers, including Debt-to-Income guidelines.

This is also why it is key for the consumer to work with a fully licensed and experienced Loan Officer, versus the more common unlicensed mortgage loan application clerk, who can help you determine the best home loan program, and explain the various program rules and guidelines. On a regular basis, I come across clients who think they can’t be approved for a home loan, yet they can. On the other hand, I also run across plenty of people who have no chance of getting a home loan today, yet they apply.

The bottom line is that it never hurts to apply. You may be given a pre-approval for your dream home, and if not, you’ll be given details on how to improve your situation to be able to qualify later.

Learn more about how to choose a mortgage loan officer here.

Download more insight on DTI and learn about the overall study here.


5 low down payment home loans

5 Low Down Payment Home Loans

Minneapolis, Minnesota:  Face it, for most people, the biggest obstacle to buying a home is a lack of down payment.  Here are 5 low down payment home loan options to help you get into your own home.

Zero Down Payment

  1. VA Loans: Available for U.S. Military personal, both current and former is a no down payment loan with no mortgage insurance. By far the most amazing home loan available.  Get VA Loan information
  2. USDA Rural Development Loans: Available for those wishing to buy in rural areas. This program is no down payment required. Income limits apply. Get USDA loan information.

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Low Down Payment

  1. Conventional 3% down. This low down payment loan for first time home buyers just recently came back into the market from Fannie Mae and Freddie Mac. Good credit or better required, and must take first time home buyer education classes. Get 3% down HomeReady loan information
  2. FHA Loans: This program only requires 3.50% down payment, and is probably the most popular loan. Very flexible underwriting guidelines compared to other programs for everything from weak credit, to higher debt-to-income ratios, and shorter waiting periods than other loans for past bankruptcy and foreclosure.  Get more FHA LOAN information
  3. Down payment assistance programs: Combine one of the standard loans with a down payment assistance program to ease your out-of-pocket expenses to get into a home. Most of these programs are loans that need to be paid back, require you to be a first time home buyer, and to take home buyer education classes. Program vary greatly by city, county, state, or community programs. Talk to a Loan Officer in your area for local program information.  Learn more about down payment assistance programs in MN.

 


Six Steps to a getting a home loan

Six Steps to a getting a home loan

Minneapolis / St Paul, MN: Buying a first home is one of the biggest, most exciting decisions you’ll ever make. Let Mortgages Unlimited guide you toward your future home.

Step 1: Manage your Money and Credit

images124Be realistic. Have some down payment money and your overall finances in order before applying for a home loan. Know your credit score too, as you need a minimum credit score of 620.

 Step 2: Apply for your loan

Contact our loan experts at (651) 552-3681, or click here to APPLY ONLINE. Your Loan Officer will look at your monthly income, credit history and debt level to qualify you for whatever loan that best fits your needs.

Step 3: Choose your Loan

FHA, VA, USDA, standard conventional, and down payment assistance loans are all available, and tailored to your individual needs, whether you are purchasing, refinancing, a first-time, or repeat buyer. Your Loan Officer will go over what programs you qualify for, how much house you can buy, and what payments will look like.

 Step 4: Home Buyer Education

Most first-time home buyers DO NOT need to take any classes, but if you are getting down payment assistance, you will. These classes teach the buying process, financing options, and being a responsible homeowner. Your Mortgages Unlimited Loan Officer will let you know if you need to take a first time home buyers class, and help you get scheduled for your class.

 Step 5: Shop for your Home

With a pre-approval letter in hand, sellers will take your offer seriously, as they know you’ve gone through the initial process of a lender reviewing an application and supporting documents, and said it “Looks Good” Finding out how much house you can afford narrows your search saving you time. After preapproval, you can work with a qualified real estate professional to find a home in your target neighborhood and price range.

Step 6: Become a Homeowner

Congratulations! You’ve gotten pre-approved, found a home, made a successful offer, and gotten through the final underwriting process. You are now officially a homeowner!

How To Apply for First Time Home Buyer Loans

It’s easy!  Simply fill out the online mortgage loan application, or call us at (651) 552-3681. We can take your application over the phone, or schedule an appointment at our St Paul, MN office.

 


Spring real estate has sprung

Spring brings renewed real estate activity to Minneapolis / St Paul

Spring 2016 has seen a welcome2_FTHB_1nice increase in real estate activity in the Twin Cities, MN area, with pending sales rising 12.6% compared to March 2015, and with the median sales price rising to $222,000, a nice 5.7% increase. Buyers signed 5,861 new purchase agreements.

Supply on the market remains a concern, area Realtor associations reported Thursday, with new listings rising only 0.5 percent, keeping supply levels at a 13-year low. Compared with last March, inventory levels fell 20.6 percent to 11,893 active properties.

Low inventory levels, at about a 10-year low is causing increased values, and multiple offers over asking price just days on the market for many homes for homes under $250,000.  As the home price goes up, it typically take longer for the homes to sell.

Mortgage lenders saw a large jump in mortgage loan pre-approval activity in February, which brings anecdotal evidence that there would be a surge of buyers this spring.


Buying a home is Cheaper than Renting

Owning is cheaper than renting, so why do so many people choose to rent?

Historically, and even today, buying a home is still cheaper than renting, but it appears that isn’t what many people believe, according to new data from mortgage giant Freddie Mac.

According to recent survey, a full 70% of renters currently feel that renting is more affordable than home ownership, and 55% have no plans to buy in the next three years. Those percentages are pretty close across all demographic groups, from young to old.images98735Many people choose to rent for lifestyle reasons, citing age, and freedom from home maintenance as large factors. Lifestyle considerations for buying or renting aside, affordability is obvious. According to Trulia’s last Rent vs. Buy report, buying remains cheaper than renting nationally. Buying is an average of 23% cheaper than renting. Buying shows to be cheaper in almost every market, which owning being the winning choice in 98 of the 100 largest U.S. metro areas, according to Trulia’s survey.

The survey shows most renters still have favorable views toward homeownership, and many still spire to own a home, but more than ever before, many choose to rent because they view it as more affordable and a better fit for their lifestyle right now.

Many renters, even those who indicated they plan to buy, believe they face hurdles in down payment, and carry too much debt. While this may be true for some, the myth is not based in reality. Maybe you can’t buy the dream house, but they can easily afford a starter house.

Starter Homes

Starter homes lost their luster, especially in the boom years of 2000 – 2006, when many first time home buyers jumped right into large new construction homes, probably above their realistic affordability range, when they probably should have followed their parents path of buying a starter home, and moving up to bigger nicer homes as age, family size, and income dictated.

As a Mortgage Loan Officer, I speak to people everyday with the champagne taste of a new home, but the beer budget.  This attitude of “I deserve” prevents many of them from buying, when historically, real estate ownership has created more wealth for the average person in this country than anything else.

Finally, the survey indicated almost half of all renters whose rents rose in the last two years say they like where they live, and will likely stay stay regardless of rent increases, low mortgage rates, and home affordability.

 


Tips for a Smooth Mortgage Application

Tips for a Smooth Mortgage Application

Shopping for a new home can be fun.  Looking at new homes, seeing different style homes, see how others decorate and starting to imagine what the home would look like when you moved it.

Getting a home mortgage loan – not so fun. But you can make it a much easier and smoother process if you start by working with a good Minnesota, Wisconsin, or South Dakota mortgage professional. Quickly followed by being realistic, cooperative and responsive to the paperwork requirements of the loan process.

First step, be realistic. Are you ready to buy a home?  Is your credit OK?  Do you have stable employment?  Do you have some money for down payment?  Assuming YES, the first step is to complete a loan application.

How to Pick A Lender / Loan Officer

Always use a local lender.  There is nothing better online than you can down the street. More often than not, it is actually the other way around. For example, no big internet lender can offers your “local” down payment assistance programs.

Always work with an experienced and fully licensed Loan Officer (read my previous article on learning how to tell the difference).

Mortgage Application Documents

images98725The mortgage application process is cumbersome and paperwork intensive.  Everyone needs to supply basic documents, but depending on your individual situation, you may need more – sometimes a lot more.

Gather and have your basic document ready as listed below. Please do not argue with your Loan Officer. When they call asking for something, it is not them picking on you, it is required. Arguing will get you no place except denied if you don’t supply what is being asked for

Checklist:

  • Photo ID
  • Two most recent pay stubs for each person signing the loan.
  • Last two months bank statements (real statements, not printout or screen shots, all pages)
  • Your most recent 401(k) or other retirement account statement.
  • W2’s (all jobs, last two years)
  • Most recently filed Federal Tax Return (all schedules) State return NOT needed

Common Additional Items

  • Documentation to verify additional income, such as child support, alimony or a pension (recent award letters, and divorce decrees)
  • Last TWO years business and personal federal tax returns if self-employed or own rental property
  • Full copy of bankruptcy papers, including the discharge notice
  • Old Foreclosure? – Need the Sheriff Certificate of Sale (available from the county)
  • Old Short-sale?  Copy of HUD1 Settlement Statement from the actual sale


Get pre-approved, not just pre-qualified

Everyone knows it is smart to get lender Pre-Approved before starting to look for a home, yet many people are actively looking at homes thinking they are Pre-Approved, when in reality, they are only Pre-Qualified.

Pre-Approved or Pre-Qualified? So what is the difference?

welcome2_FTHB_1As a Loan Officer for over 20-years, I can tell you story after story of people who thought they were Pre-Approved, signed a purchase agreement, gave notice on their apartment, only to be told a week before closing that they were denied.  The vast majority of these people, calling me to see if I can magically help them had two big items in common:

  1. They applied at a bank or credit union
  2. They NEVER supplied the lender with all (or even any) basic supporting documents up front.

Simply put, if you didn’t supply current pay stubs, bank statements, W2’s, and Tax returns, YOU ARE NOT PRE-APPROVED – No matter what they tell you!

Looking to buy a home in Minnesota, Wisconsin, or South Dakota? Don’t have your dream fall apart at the last minute, get properly Pre-Approved for a home loan today.

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The Mortgage Broker vs. The Bank

The Mortgage Broker vs. The Bank

Minneapolis, MN: When you are considering financing a home, you will have the choice to work with either a non-bank mortgage lender or a bank.  Non-bank lenders encompass many people, from a traditional mortgage broker, to correspondent lenders (think super broker), or direct lenders who are not banks.

Real Estate, Minnesota, Minneapolis, for sale, mortgage rates, interest rates
Get Pre-Approved Today – Click HERE

Most potential home buyers think everyone who isn’t a bank is a broker. While it is more complicated than that, for sake of this article, I’ll call everyone not a bank a broker.

Full disclosure. I work for a correspondent lender. We originate, underwrite, fund and close our own loans, then sell them to large servicers (typically a big bank) after closing.

Here are a few distinct pros and cons of working with a bank or a broker.

Brokers:

  1. Mortgage Brokers generally have lower operating costs and less overhead (hence the whole concept of broker to begin with)
  2. Mortgage Brokers generally have significantly more loan options as they provide the products of many lenders
  3. Mortgage Brokers generally are more knowledgeable and experienced. The Loan Officers at non-depository lenders (brokers) must be individually licensed, pass state and federal tests, and complete continuing education each year. Loan Officers working for a bank or credit union do not.
  4. Mortgage Brokers generally work 100% by commission, and need to deliver 100% satisfaction to our clients.
  5. Generally speaking, you work directly with your Loan Officer, and no one else to get through the maze of loan options, paperwork, etc.

Banks

  1. Banks are convenient because they often have many locations.
  2. Banks have higher overhead. All those brick and mortar locations, and paying for stadium naming rights gets pass on to you.
  3. Banks only offer their own products. They may not offer what you need.
  4. Banks will cross sell you on all their other products.
  5. Generally speaking, at banks, your Loan Officer is more typically a low level application clerk, vs. a true mortgage professional. You will generally be passed along to many people during the process.

Those are just 10 factors to consider, obviously there are many more ways to compare. But if I was doing my largest financial transaction of my life, I’d want an experienced person, with the largest amount of loan options, and with the least overhead, so I get the best possible deal – and that is almost never at a bank.


Average home price up 5.2% for Oct 2015

Home prices up 5.2%

Home Values UP
Home values up 5.2% Nationally for Oct 2015

The latest S&P/Case-Shiller Home Price Index shows that home prices were up nationally 5.2% in October 2015 compared to October 2014. That’s an increase from the 4.9% rise recorded in September 2015 over September 2014.

Denver, San Francisco, and Portland, Oregon all saw large 10.9% increases year-over-year.

The top 20 percent increased 5.5 per cent overall to return to their winter 2007 levels.

We are getting there, but these numbers still represent on average, around 13% below 2006 peak home values.


Finding the Best Mortgage Loan Officer

Minneapolis, MN:  Buying a home for most people is the largest financial transaction of your life. Finding the Best Mortgage Loan Officer  that is licensed, educated, experienced, professional and ethical is probably the most important decision you’ll make next to actually picking out that perfect dream home.

Most people these days pick their mortgage company one of three ways:

  1. Calling the bank where they have their checking account
  2. Going with whomever the Realtor suggests
  3. Online search (but usually only for the person quoting the lowest rate)

None of these in and of themselves are right or wrong, but here are some tips to know and understand:

First, understand that the mortgage company or bank that you choose in most cases has little to do with the success of your transaction. Essentially all mortgage lenders have and offer the same basic programs with the same underwriting guidelines. FHA loans for example are FHA loans no matter who you call, so in most cases, there is nothing special that one lender has over another.

Yet for others, there can be some differences, especially if you are on the edges in terms of loan approval. For example, a big bank with the stagecoach in their logo will not offer FHA loans over a 45% debt ratio, while some mortgage brokers (like us) will go to 50% debt-in-income ratio. This is a good example of why a mortgage broker may be a better choice, as they offer the products of multiple lenders, as opposed to just their own.

Using this one example, you may have lost out on your dream home simply because you chose the wrong lender.

Licensed Loan Officer Versus Simply Registered:

All mortgage Loan Officers must have a tracking / registration number known as an NMLS number. But having this number does NOT mean the Loan officer is licensed, or experienced.

Loan Officers at banks, credit unions, or mortgage lenders owned by a bank or credit unions can be, but are NOT required to be licensed in any way. Loan Officers at non-bank mortgage companies or brokers ARE REQUIRED to have an individual mortgage license.NMLS Consumer Access

You can check if your Loan officer is simply registered, or fully licensed by searching them on this public web site:  www.NMLSconsumerAccess.org.

At the bottom of the page, under licenses and registrations, there will either be one or more states listed, which means the person is licensed. If it indicates something similar to “Federal National Mortgage Originator”, this is a fancy name that means they are NOT licensed.

Being licensed versus simply registered does not automatically indicate if a Loan Officer is a good choice or not, but if one was doing the largest financial transaction of their life, I’d probably lien towards someone who has had to take schooling, pass state and federal testing, and is required to complete continuing education each year to be licensed, versus someone who didn’t have to do any of those things to simply be registered. Heck, even your hairdresser needs a license!

Using this example, you may have lost out on your dream home because of the the unlicensed, and inexperienced Loan Officer you chose.

Understanding Closing Costs and Interest Rates

Not only do most lenders only offer the same underlying loan products as everyone elsemortgage closing costs (Fannie Mae, Freddie Mac, FHA Loans, VA Loans, USDA Loans), but they all have the same underlying closing costs,  get the money to lend you from the same source, and interest rates are based on the same bond market everyday.

This is why you’ll notice all standard rate quotes are almost identical. This is why you’ll notice all closing costs quotes are almost identical.

All lenders have the same actual closing costs; appraisal, credit report, state deed taxes, county recording fees, title company charges, underwriting, origination fees, etc.  However, how lenders charge them to you can vary, and this is tied directly to your interest rate.

For example,  assume your shopping, and one lender says your closing costs are $5,000, and the next says $3,500. The lower price sounds good, and that would be true if the rates were the same. But they almost never will be.

More overhead equals higher rates

Advertising and buildings are expensive. The previously mentioned “Quick” lender for example advertises all day everyday on all TV channels, and radio stations all across the country.  You can’t go anywhere on the internet without seeing one of their advertisements.

How much does all that cost?  Must be millions. You are foolih to think that higher cost isn’t passed along to you in terms of the interest rate they charge you.

Sames with the big lenders with branches everywhere, and paying hundreds of millions for stadium naming rights.

Lender Credits

Lender credits towards your closing cost is a tool lender use to lower your out-of-pocket closing costs up-front by slightly increasing your interest rate. Mortgage interest ratesBy doing this, the lender requires less initially because they make it up by collecting more in interest over time.

Some lenders start right out of the gate by saying they don’t charge origination, or maybe they will pretend to pay for things like your appraisal. Someone is paying those items, and it is always you.

Now there is nothing wrong with taking a slightly higher rate to lower costs today. We do it all the time. But just understand that you are still paying for those costs, just in a different way.

Look at this 30-yr fixed screen shot from today for a $200,000 loan. At 3.875%, lender would charge $750 in discount points to “buy” this lower rate, but at 4,125%, lenders would reduce your closing costs with a lender credit of $2,250. The monthly payment difference between the two rates is $29.00.

Internet Lenders

There is nothing an internet lender can offer you that the local mortgage lender down the street can’t offer. They do not have lower rates, they do not have lower closing costs. But there are many things the internet lender can’t offer.

One big item is local knowledge, and dedication to the community. Some kid working in a cube in Detroit, MI could care less about my back yard or Minneapolis, St Paul, MN.

I constantly get phone calls from people who started a mortgage application with a big internet lender, who is “Quick In” mortgage.  They complain about high pressure sales, lack of product knowledge, mandatory up-front fees, failed closings, and more.

I also get a lot of calls from people who filled out an inquiry form at places that “Lend from a Tree”. Funny and cute commercials about applying in your underwear, but this place isn’t even the lender.  Rather, they take your name, then sell it to as many real lenders as possible for around $40 a lead. You are then inundated with calls from all these lenders trying to one up the other with false and misleading promises to get you to use them.

Big out-state internet lenders also NEVER have the ability to offer any state of local first time home buyer, or down payment assistance programs.

Using this example, you may have lost out on your dream home because you picked an out-state internet lender who doesn’t offer all the loan products available in your area.

Realtor Referrals

In theory, a Real Estate Agent referral to a Loan officer should be something of value, but not always. This is essentially because there are two underlying types of referrals.

A referral because the Real Estate Agent has worked with the Loan Officer for a long time, and knows them to be a licensed, knowledgeable, experienced mortgage professional looking out for your best interests. This is a good referral.

A referral because the Loan Officer works for the same company, or otherwise is heavily influenced by the owners of the Real Estate Company to refer to a specific lender or internal Loan Officer simply because it makes someone else money regardless of the qualify of the Loan Officer.

While not automatically bad, the second type of referral is highly suspicious. Tips to this type of referral are that the Loan Officer works for the same company, they share office space, or if you have already told your Real Estate Agent you have a lender you are happy with, and they become pushy or start talking negatively about your choice to get you to go to their choice.

The Bottom Line

As you can see, your Loan Officer choice is important. Ask questions, get answers. Just because someone refers, they advertise a lot, or appear to be quoting a super low rate or closing cost doesn’t mean they are the best for you, or that you shouldn’t shop or get a second opinion.

Take the time to pick a great lender, just as you take the time to pick the perfect house.

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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and #98 of the Top 100 Loan Officers in the Nation for 2015 by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681


Home ownership IS cheaper than Renting

Owning is cheaper than renting

Minneapolis, MN:  The debate continues.  Is owning a home more affordable than renting.  New data is in showing that for most people, yes, owning appears to be cheaper than renting.

A survey by the big online company that starts with a Z and rhymes with Willow (I’m not a fan, so I don’t like to use their name) found on average, Americans spend about 15% of their income on a home mortgage loan, while renters that live in the nation’s largest cities spend around  30% of their income on just their rent.

Conventional wisdom says housing debt of 30% of your income or less is deemed affordable.

The report also looked at other issues effecting homeownership, and found that, just like in the past, coming up with down payment is a challenge for many, and that 13% of home buyers in 2014 got their down payment as a gift from relatives.

Many people are not aware that most home buyers DO NOT need a 20% down payment.  Conventional loan programs allow for as little as 3% down payment, and the popular FHA home loan only requires 3.5% down payment. If you are US Military, a VA loan is a no down payment loan. If you are looking to buy in rural areas of the country, the USDA Rural Development loan is also a no down payment loan.

Only if you live in a “high cost” are of the county where even the most modest home costs over $417,000 will you maybe need a larger down payment.

Many areas and potential home buyers also qualify for First Time Home Buyer programs, like the Minnesota Housing Finance Agency Start Up program, here in Minnesota where I am, that will typically loan the new homeowner a big chunk of their down payment money. The program here only requires the buyer to have $1,000 of their own money to buy a home.

Sadly, many renters THINK they can’t afford a home, when statistics tend to prove otherwise. Between small down payment requirements, gifts from relatives, down payment assistance programs, and even taking money from your 401k program for down payment, most people CAN make home ownership work.

Another challenge is debt.  Many talk about student loan debt killing home buying for millennials.  As a Loan Officer, I simply don’t see it.  What I DO see is first time home buyers needing to get back to reality in their home purchase. The term starter home needs to return to the lexicon of home buyers.

Your first home needs to fit into the reality of your income and debts. Therefore, your first home may not be your dream home.

Credit is the final challenge.  If you pay your bills on time, you should be just fine.  If you don’t, you need to get that corrected first. Realistically, you need to have a middle credit score of 620 or higher. If you have poor credit, you will need to work on improving your credit first. There are NO bad credit loans available.

 

ARE YOU READY TO BECOME A HOMEOWNER

All mortgage loan applicants need to meet some basic requirements:

– OK or better credit history.
– Stable employment
– Buy a home you can safely afford (known as debt ratios)
– Have some money in the bank

If you are realy, contact a local mortgage broker in your area.  Give them a complete mortgage application, and let them zero in on what programs you qualify for, how much house you can afford, what the payments will look like, and how much money you will need to pull it all together.

If it all looks good, you’ll be put in contact with a local expert Real Estate Agent, who will help you select that perfect home.


Mortgage loans. Why all the paperwork?

Mortgage loans – Why all the paperwork?

Loan PaperworkAs a Loan Officer serving Minnesota, Wisconsin, and South Dakota, I am constantly asked why is there so much paperwork required to get a mortgage loan today. It seems that the lender wants to know everything about you these days, and you would be correct. Your mortgage lender does want to know a lot about you.  If you were to give a complete stranger a huge loan, for a 30-year commitment, what would YOU want to know about them?

To make it feel worse than it really is, from about 1999 until 2007 during the housing boom, there were many programs available that allowed for limited documentation, or even no proof of income. Many people took advantage of those programs. Unfortunately, a large number of those people were allowed to bite off more loan than they would have been allowed if they proved income, contributing to the real estate collapse starting in 2007.

Loan Documentation Requirements Today

No one wants foreclosures and bad loans. It isn’t good for the home buyer, the neighborhood, or the economy.  For that reason, mortgage companies need to verify and double check everything on the application, and to make sure you are a good risk.

There are three very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

  1. The mortgage industry was a bit too trusting in the past. Lenders for example asked for a pay stub, but we took what you provided at face value, and there was no double check. This allowed fraud to become rampant. How hard would it be to scan a W2 that said you made $30,000 a year into a computer, then use Photoshop to change that the 3 to an 8, and now you make $80,000 a year income.
  2. Even without fraud, during the run-up in the housing market, many people qualified for mortgages that they realistically could never pay back. The government has mandated new guidelines that now demand that the mortgage lender  prove beyond any doubt that you are indeed capable of affording the mortgage. The rule is called ATR, or the “Ability to Repay” rule. So no more stated income, or limited income loans.
  3.  The lenders have never wanted to be in the real estate holding business. Since the collapse, lenders suffered huge losses that came close to destroying the economy, and were were forced to take on the responsibility of liquidating millions of foreclosures,  and negotiating millions of more homes in short-sales.

The Good News About Mortgage Loans

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process. If you got a loan ten to 20-years ago, yes, it was easier. But at the same time, if you never experienced that in the past, your fame of reference is that it really isn’t all that difficult today.

Instead of complaining about the paperwork required, be thankful that that you can get a loan, and get it at these amazingly low mortgage interest rates.


Minneapolis St Paul Home Values Continue to Rise

Minneapolis St Paul area home values continue to rise

Twin Cities area median home prices continue their creep upward, increasing 4.9 percent compared with October of last year.
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Housing inventory declined 25.6 percent, to a 3.2-month supply. Generally, five to six months is considered balanced. While the bulk of the metro as a whole is favoring sellers, not all areas, segments and price points reflect that.

The median list price in the metro rose 4.4 percent to $240,000, while average price per square foot rose 3.2 percent to $127, according to The Minneapolis Area Association of Realtors.

Less foreclosures, less homes underwater, less homes on the market, and attractive mortgage interest rates have all combined to push home values nicely higher

  The October median sales price was $218,000 according The St. Paul Realtor Association.


2015 Twin Cities home sales continue to strengthen

All signs point to Twin Cities home sales continuing to strengthen

Twin Cities homes sales maintained their strong pace through September, hitting a 10-year high, according to news releases this week from area Realtor associations.

signsThere were 5,114 closed sales last month, a 12 percent increase from last year and the highest level for September since 2005, the Minneapolis Area Association of Realtors said in a news release. Pending sales rose 12.3 percent to 4,635.

Fewer sellers listed their properties, with new listings decreasing 6.9 percent to 6,355. Inventory levels fell 16 percent to 15,928.

With more buyers than sellers, the median price rose 8.3 percent over last year to $222,000.

This supply-demand imbalance means prices have risen for 43 consecutive months, the association said.

Year-to-date prices have risen 6.8 percent on average

Also noted was a continued “product mix shift” back to traditional sales and away from distressed sales such as foreclosures. This also has brought up the median price.

We expect mortgage interest rates to stay below their long-term average for years to come, and around the low 4’s for the immediate future. The trick will be sustaining price gains that motivate enough sellers to list their properties without pricing out today’s buyers — particularly first time home buyers.

The momentum in both closed sales and pending sales certainly bodes well for 4th quarter and for a strong finish to 2015.

  • Anoka County – Up 11.4%
  • Carver County – Up 4.2%
  • Chisago County – Up 8.8%
  • Dakota County – Up 4.1%
  • Hennepin County – Up 7.5%
  • Ramsey County – Up 6.7%
  • Scott County – Up 3.4%
  • Washington County – Up 3.1%
  • Wright County – Up 14.8%
  • 13 County Metro area – up 8.3%