Mortgage Loan Approval – Things NOT to do

Applying for a home loan can be a stressful time, but doesn’t need to be if you follow certain rules that can unexpectedly trip up your mortgage loan approval.

Some of these tips will be obvious, while others won’t – but all of them are items that regularly cause underwriting headaches. Avoiding these mistakes will help lead to a smooth stress free home loan closing.

images124Dos and Donts of a Smooth Home Loan Approval

  • DO continue to live at your current home.
  • DO continue to make your home loan payments or rent payments on time
  • DO continue to use your credit as normal (but see don’t items)
  • DO keep working at your current job.
  • DO keep your same insurance company.
  • DO stay current on all your existing accounts.
  • DO keep credit card balances low (below 25% of available credit is perfect)
  • DO call your home loan expert if you have any questions.

DON’T  do any of these items within 90-days of application or until after closing

  • DON’T apply for ANY new credit. No cars, no furniture, no credit cards, no cell phones, no boats, no new loans of any kind
  • DON’T buy any furniture ON CREDIT after you’ve found your dream home
  • DON’T close any credit card accounts,  or consolidate your debt onto one or two credit cards.
  • DON’T pay off any loans or credit cards without discussing it with your Loan Officer.
  • DON’T change bank accounts
  • DON’T move money around from one account to another.
  • DON’T pay off collection and charge offs accounts without a discussion with your home loan expert.
  • DON’T amend your tax returns
For a Refinance
  • DON’T start any home improvement projects, or don’t bother applying until any current project is finished

The biggest item left is simply this… ALWAYS tell your Loan Officer EVERYTHING. Not thinking it is important, or even straight up lying, is only going to cause trouble down the line.  You’d be surprised at the checks underwriting does during the process, and the things that are “discovered”. Mention everything it to your licensed Loan Officer right away so they can help you determine the best way to achieve your home loan goals, and avoid any unnecessary delays or surprises during the process.


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

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

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

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

How soon after a short-sale can I get a new mortgage?

How Soon Can You Get A Mortgage After a Short-Sale or Foreclosure

Depending on which lending institution you ask you will receive different time-frames allowed to purchase again after a short sale or foreclosure. The reason is most lenders have credit overlays, which translates into stricter underwriting guidelines than Fannie Mae and FHA have published.

There are lesser time-frames allowed if there are documented Extenuating Circumstances involved beyond the control of the borrower, such as serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.

Divorce, loss of employment, inability to sell the property and job transfer or relocation does not qualify for extenuating circumstances. All other events are known as Financial Mismanagement.

  • Conventional – Foreclosure – 7 years
  • FHA – Foreclosure: 3 years.  Exception: No waiting Period if the borrower was current on their mortgage and all other installment debt for the 12 months preceding the short sale, the new subject property is not in the same geographical area as the short sale, and the short sale lender accepted the short sale as payment in full.
  • USDA – 3 years. You may read of significantly less time, but the rules are so tough, it will never happen.
  • VA – 2 years minimum. Score over 640, otherwise 3-years
  • Conventional Short-sale 2-7 years: 2 years with 20% down, 4 years with 10% down (2 years with 10% with  extenuating Circumstance) and 7 years with less than 10% down or financial mismanagement.

I am using the current Fannie Mae conventional guidelines to close loans for Short Sale as of 6/20/2012.


What does YOUR credit score say about you?

What does your credit score say about you?

Everyday I am looking at credit reports, and making credit decisions. It amazes me sometimes the people who call and say they have good credit, when they don’t. It also amazes me the people who have good credit, and fear they can’t get a loan.

So What’s Your FICO Credit Score?
Every lending facility uses basic guidelines to determine your credit worthiness, including your FICO credit score. Upon reviewing your mortgage application, you’re given a credit grade and credit scoreand a determination regarding your home mortgage loan approval or denial.

There are no hard-and-fast rules for determining your specific credit score grade.  Each lender’s criteria may vary slightly, but generally speaking, if you have a mix of credit type (mortgage, revolving, car loans), you have had it for awhile, and you make your payments on time. You have nothing to worry about.

800 + Credit Score: AAA+ A credit score of 800 plus is basically flawless credit. This is usually obtained only with a long history of unblemished credit. You will get the best of the best anything credit related, from mortgage loans to car insurance. Scores in this bracket represent about 13% of the population.

740-799 Credit Score:  AA+ A credit score of 740-799 is considered great credit, and will typically result in the best interest rates and approval rates for anything credit related. You have nothing to worry about if you scores fall in this category. In fact, roughly 27% of the population has a credit score of 750-799 alone.

700-739 Credit Score: A+ A score in this bracket is considered good credit. Although it’s not perfect, you should still be able to qualify for most home mortgage loans and auto or rental leases. You may be offered a slightly higher interest rate than offered to borrowers with excellent credit for mortgage loans, credit cards, car insurance, and homeowners insurance.

680-699 Credit Score: B+ Credit scores from 680 – 699 are considered average. You should never have any problems getting basic financing, but you are now in the area where you may pay a slightly higher rate, be required to have a bigger down payment, or be offered less favorable terms. There will be situations where a credit score in this range may prevent you from getting certain types of financing, such as an zero down mortgage loan, the lowest auto insurance premium, or a zero down car loan.

620-679 Credit Score: C Credit scores from 620-679 are still considered “good” or “ok” by many creditors, though you may see further restrictions and fewer approvals when attempting to get a car loans, credit cards, or a mortgage. For example, you can still get an FHA mortgage with this score, but a lot of conventional loan lenders would deny you with a score below 660. Large numbers of people have score in this range.  It would be very wise to evaluate why your score is in this range and try to improve it. In this range, you are NOT getting the best deals in the market.

580-619 Credit Score: D Credit scores in this range are bad, and clearly below average. If you are on the lower end of this range and someone asks, you can answer “I have bad credit“. You will have a difficult time securing a loan, or applying for a credit card. If you are able to secure financing, you’ll find higher interest rates for your low credit scores. If your credit score falls in this range, you definitely need to take a hard look at your credit report and take measures to raise your credit score. Many consumers with credit scores in this bracket are considered “subprime” and may have to work with bad credit banks and lenders to secure financing. You’re basically throwing money away at this point because of your poor credit.

500-579 Credit Score: F

No discussions, no glossing over it. Credit scores in this range are just flat out bad. If you’ve got a credit score in this range, there’s a good chance you have a major derogatory items on your credit report  such as as major late payments, court judgements, collections, foreclosure, or a bankruptcy. There is no question that your credit score is in need of serious credit repair. You will almost always be denied for credit with this score range, or pay such a premium for the credit, it usually is not worth it. You’re clearly paying higher interest rates and making credit mistakes that will impact your life for years to come.

Below 500 Credit Score

Credit scores below 500 are very bad. You almost have to get up everyday and ask yourself “how can I further wreck my credit today” to be in this category. You will usually have current, or very recent major issues, such as a bankruptcy or foreclosure. Improving credit from this level will usually take years to repair (but it can be done). Credit will universally be denied, and you will be paying a major premium on things like car insurance.



Self employed individuals often ask … Why is it so difficult to qualify for mortgage financing?

Minneapolis, MN:  Self-employed borrowers, those who work on commission, or those who receive tipped income present one of the most challenging areas of mortgage underwriting. Qualifying self-employed people often requires significant extra time, energy, and patience. A fair and honest pre-qualification requires a special set of Loan Officer skills and expertise.

Long gone are the days when any Loan Officer could give a low doc, no doc, or stated income loan to a self-employed borrower, commission, or tipped income client without any training or special consideration.

Generally speaking, it’s tougher for the self-employed buyer to qualify for a mortgage because it is hard to answer the question: “What is your income?”

What did you earn, what did you write off? Taking advantage of tax laws to reduce income is great for reducing tax liability, but also shows you make less money, making a potential home mortgage loan approval difficult.

Next lenders are looking to see a income history. Is income increasing, decreasing, or stable? This all comes into play for self-employed, commissions, and tipped income home buyers and those same type clients interested in a refinance of their existing home loan.

Today, lenders are back to the old way of providing mortgage loans, and the vast majority of Mortgage Companies, and especially Mortgage Loan Officers are either afraid to work on a self-employed persons home loan, or simply lack the extra knowledge and skill required to get self-employed people a home loan.

Reading, understanding, and qualifying a buyer off of tax returns is not for the weak of heart, or unlicensed bank reps working at a call center.

Self-Employed and Commissioned DOCUMENTS REQUIRED:

Be prepared to send us the following documents. We will be unable to assist you or evaluate you mortgage loan qualifications without them:

  • Last two years personal tax returns (all pages, All schedules)
  • Last two years business returns if employed through a corporation (all pages, all schedules)
  • Current Year-to-Date P&L (Profit and Loss Statement) and Balance Sheet

We will also require the traditional standard home loan approval documents:


  • Copy of most recent two (2) years W-2 statements (for you and any co-borrowers)
  • Copy of pay stubs covering the last (30) thirty days (for you and any co-borrowers)


  • Copy of most recent monthly bank statements (ALL PAGES. If it says “page 1 of 3”, I need all 3 pages no matter what is on them.
  • Copy of most recent statements on 401K, IRA, or Mutual Fund Accounts
  • Copy of most recent brokerage statement for any stocks, bonds or certificates of deposits (or copies of actual certificate)

LESS THAN 2-YEARS SELF-EMPLOYED? YES, it is possible… But it is an exception and NOT easy to get approved. You will need to have worked in the exact same field, with a similar income, and have at least 1-yr of self employed Federal Tax Returns

City Living Home Loan Program – Minneapolis and St Paul.

Learn all about The City Living Program in Minneapolis and Saint Paul. River walks, people, fine dining and concerts. And that’s just the beginning.

From condos and lofts in downtown to charming homes in historic residential neighborhoods, the Twin Cities area has much in the way of housing options that allow you to enjoy all that major cities have to offer.

With City Livings loan programs, the reality of urban living and home ownership is not far away. Home buyers accessing this First Time Home buyer Loan may qualify for a below market interest rate may also be eligible for Down payment and Closing Cost Assistance. As a borrower, you can choose from two market mortgage interest rates; one rate comes with a Down Payment Assistance Grant (DPA) of either 2% of your new homes purchase price, while the other rate is without the grant (Non-DPA).

This program is made available by the cities of Saint Paul and Minneapolis, and is available for homes within the Minneapolis and St Paul City limits.

General Program Information and Qualifications

  1. You must live in the home.
  2. Property must be single family home, or duplex in Saint Paul or Minneapolis city limits.
  3. Income and purchase price limits apply.
  4. Home Buyer counseling class is required. (call 651-552-3681 to register)
  5. First Time home buyer funds are reserved on a first-come, first-serve basis First Time Home Buyer money NOW AVAILABLE.

Apply online and be ready to go!