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Leslie Vanderwerf
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One of the biggest questions when buying a home is how much money do I need? It will depend on your down payment and closing costs. For many, you may only need 3-5% for a down payment (unless you want to put more down). Plus you will need money for your closing costs - I usually tell clients to figure roughly 3% (more for smaller mortgages, less for larger mortgages) - that includes your closing costs and prepaids (prepaids are interest, insurance and taxes, including setting up your escrow account). The issue isn't always the money - but where does the money come from. Underwriting will require that we document where all the money came from for closing. In some cases it is very easy - it comes out of your checking or savings account. Maybe it's coming from the sale of your current home. Maybe it's a gift. How do we document this? It depends! If you are selling your home, we will get a net sheet from your realtor that gives us an estimate of what you should get when you close on the sale of your home. Then we verify that at closing (or right before) with the actual numbers. As long as you are getting the same or more than we estimated, you are good! If it's less, we may have to adjust numbers and that may delay your closing. For those getting gift money, we need to get a gift letter and document the transfer of the gift. The documenation depends on whether you are using a conventional or FHA mortgage. FHA requires us to document that the person giving the gift had the funds to give you the gift. One issue that happens frequently is paying off debt to qualify -that works as long as we can show that you have the money to pay off the debt. Maybe you paid off a credit card during the processing of your loan, that's great - we need to document it. We need bank statement that shows the account was paid off. Does your bank statement have cash deposits on it? If so, we are going to have an issue - typically it means backing out that deposit. That can affect how much money you have for closing. Do you have deposits that may be hard to verify? Keep copies of the checks you deposit so... Continue reading
Posted Apr 20, 2017 at Homes MSP Real Estate Blog
Are you thinking about buying a rental property or maybe buying a new home for yourself and keeping your home as a rental? It happens frequently. Sometimes a friend mentions that they have a rental home and make money every month, sometimes someone you know says investing in real estate can be a great way to make money. So the big question - how to start? Should you start? For some, it's an easy answer - they can advertise for tenants, have the ability to make repairs, don't mind phone calls to fix things - at all hours! Others may not want to take those calls and decide to hire a management company. Whatever you decide, the most important thing is to make sure the property you are buying has the potential for a rental. You need to calcuate expenses and figure out if the property will make sense after paying the mortgage, taxes, insurance, expenses and allowing money for repairs. Make sure you allow extra to set aside for potential repairs or if the property is empty between tenants. How do you buy a rental home? Most people will either turn their current home into a rental or take out a mortgage on a new property. If you decide to turn your current home into a rental and buy a new home for yourself, you will need to qualify for both payments - without the help of rental income. If you can do that, it's a great way to get started. You can also take out a conventional mortgage for an investment property. Plan on needing at least 20% down - ideally 25%. Rates are slightly higher for investment properties than an owner occupied home. Some look into duplexes - living in one side and renting out the other. That is a great way to get started - you are occupying the property, get rental income to help qualify and have rental income to offset your mortgage payment. You don't need quite as much of a down payment - since you are living it the home, you can use FHA financing also, if that works better in your situation. Are you thinking you want to flip homes - buy them, fix them up and then sell them? That can happen but most people use cash to buy the homes or "hard" money lending. Hard money lending has different terms... Continue reading
Posted Apr 13, 2017 at Homes MSP Real Estate Blog
Many homebuyers, especially first time homebuyers, are struggling with trying to buy a home and deal with student loan payments. There are many potential buyers that are putting off home ownership due to their student loans. Just because you have student loans does not mean you can't buy a home. FHA, Fannie Mae, VA and Freddie Mac have different rules for how they deal with the student loan payments. Lately I have had several people looking at buying that have reduced payments on student loans - IBR (income based repayment) plans. This can affect how we qualify you for a mortgage. FHA requires that we use 1% of the balance or the actual payment - whichever is higher. For many on IBR payment plans, that means increasing the amount you currently pay on your student loans. If your student loan is still in deferment, we have to use 1% of the current balance. For many first time homebuyers, FHA is a very common mortgage, so it helps to be aware of how student loans play into the qualifying. For those looking at conventional loans, Fannie Mae and Freddie Mac vary when it comes to student loans. Currently, Fannie Mae requires us to use 1% of the balance or the actual fully amortizing payment. If your loan is still deferred, we need to use 1% of the balance, we cannot omit the payment. If the repayment terms are not known yet, we can use 1% or calculate a payment based on the balance of the loans. Freddie Mac allows us to use the payment on the credit report. So for those with IBR payment plans, Freddie Mac is a terrific option. If the payment is on the credit report, that is the payment we use. If we do not know the payment, we need to use 1% of the balance. Freddie Mac also has a 3% down program that I have been using for several of my buyers - it allows them to get into a home with minimum down and reduced mortgage insurance if they meet the income guidelines. Combining this program with the payments on the credit report makes it easier for many home buyers to buy now rather than waiting until they pay off their student loans. VA requires us to use the the credit report payment or calculate a payment based on the balance of the loan... Continue reading
Posted Apr 6, 2017 at Homes MSP Real Estate Blog
Many people tell me that they think they can't buy a home because they have had a bankruptcy or foreclosure. That's not true. You need to wait for a minimum of two years - depending on the type of loan that you are doing and you need to re-establish your credit. The minimum time periods after a bankruptcy vary based on the type of loan - -FHA requires two years from the discharge date of the bankruptcy -VA requires two years from the discharge date -Conventional loans require four years -USDA loans require three years. There are a few circumstances that may allow you to buy sooner, but they are hard to document. Normally you need to prove extenuating circumstances and there are very few situations that will work. You are better off to plan on the normal time frame and take the time to re-establish your credit and save money for a down payment. If your home was included in the bankruptcy, there are some different rules that apply. The typical waiting period after a foreclosure is seven years for a conventional loan. However, if the foreclosure was right before the bankruptcy and the home was included in the bankruptcy, the bankruptcy rules will apply. In this case, if you want a conventional mortgage, you will need to wait 4 years from the discharge date instead of the normal 7 years. However, if you filed bankruptcy and then your home was foreclosed on, you will need to wait 7 years from the date of the foreclosure. Once you have filed bankruptcy, make sure you rebuild your credit. Start small - a small credit card and use it - but pay it down every month. If you leave a small balance, the credit bureaus know it's an active account and it may help your score. Make sure you keep the balance at less than 25-30% of the available credit. Your credit scores will improve as time passes. Creditors like to see more than just credit cards- car loans and student loans can also help your score - but make sure you make all the payments on time. Remember that your monthly payments will affect what you can qualify for, so you do not want to overspend if you are looking to buy a new home. Keep your paperwork on the foreclosure and bankruptcy, your lender will need to see it.... Continue reading
Posted Mar 30, 2017 at Homes MSP Real Estate Blog
You are buying a new home, super excited, you have your mortgage preapproval and are ready to go - or are you? One piece that all lenders need to do is verify the money used in your mortgage transaction. We need a 60 day history. That sounds easy, right - just two months of bank statements. Maybe. Maybe not. Once you have written your purchase agreement, you will need to write an earnest money check. Most lenders will need to verify that the earnest money cleared your account. That may mean we need another bank statement. Maybe we can't wait for another statement - maybe we need a bank printout showing the check cleared. That will also work - but it needs to show the bank name, your name and at least a partial account number. It also needs to show the transaction history back to the last bank statement including daily balances. Underwriters are looking for large deposits that may be from another source besides your payroll. Maybe you got a gift from your parents - that should be fine, but we need to document that it is a gift and you do not need to pay it back. Did you sell a car or something else? We need to document that you owned the item you sold and what the value was. Underwriters want to make sure there is not a new loan that could affect your ability to make your new mortgage payment. Do you have automatic deposit or do you deposit your paychecks? If you deposit your paychecks, you will need to send copies of the paystub to your lender to match up with the deposits into your bank account. If you are self employed and make deposits during the month, you will need to document the deposits. Keep copies of what you deposit so you are prepared to give them to your lender. Cash deposits can't be used - we can't document where the cash came from. They may actually lower your available bank balance so try to avoid cash deposits. Look at your bank statements and see if there is anything that might trigger a question. If so, talk to your lender about it so they are aware of what is going on. Expect underwriting to go through every page of your bank statement - if that last page is just advertising, we still... Continue reading
Posted Mar 23, 2017 at Homes MSP Real Estate Blog
The day you close on your new home is a big day! We celebrate birthdays, weddings, graduations - closings should be celebrated too! But it can also be a little mysterious - everyone talks about it, but what happens at closing and what do you need? You will usually get to pick the time and location of your closing when you are the buyer, but you may need to coordinate with the seller. When you go to your closing, plan on at least one hour- there are times it may go longer but the typical closing lasts about an hour. I usually suggest to my buyers to avoid closing on the last day of the month and the last Friday of the month - those days can get a little crazy as so many want to close at the end of the month. For better customer service, you may want to choose another day if possible. When you go to your closing, there may be a room full of people or there may be very few- when we had so many foreclosures, there was rarely anyone there for the sellers side as the property was bank owned. Now it's very common for the buyer, seller and both realtors, plus a closer for both parties to be in the closing. Frequently your loan officer will also be there - it becomes a big party!! There are times a seller may pre-sign depending on what they are doing and then they won't be at the closing. When the buyer and seller are both there, it's a great time to ask questions about the house, yard, neighborhood. Make sure you have a valid photo id - either your driver's license or a passport. If there are any conditions on your loan that you may need to provide, make sure you bring those items - your loan officer will let you know if you need anything. It may be a gift check or maybe a statement showing a payoff on a credit card, etc. You will need to bring the funds needed for closing. Typically that needs to be in the form of a cashier's check made out to the title company or a wire. Check with your title company to verify how you need to provide the funds - each title company is slightly different. You will sign several forms - some of... Continue reading
Posted Mar 16, 2017 at Homes MSP Real Estate Blog
When you buy a home why should you get title insurance? The quick easy answer is that your lender will require it. Title insurance protects the lender from any title issues to your home and property. Title defects could include something as simple as a mistake in the title search, forged documents and claims from unknown parties. The amount of the policy is equal to the amount of your mortgage when you first buy your home. You can also purchase an owner's title insurance policy that protects you. This is a one time purchase that lasts as long as you own the home. This protects your equity in the home. You may not know there is a title issue until you decide to sell your home, this can help resolve any title issues. It could also be false claims by others or improperly recorded legal documents. It may be a claim by an undisclosed divorced spouse. It could be community property issues or a false affidavit of death. There are many reasons that someone may claim an interest in your home, that's why title insurance is available. The title company will do a search and exam to make sure you have clear title to your home and land. The search should come up with any issues however there are times things are missed. One item that I seen more often is a previous mortgage was not released from a previous owner - title insurance will help with that. Some people question if they need an owner's policy with a new construction home - the answer is still yes. Title insurance protects the land also, so if there were prior claims on the land or possibly a contractor's lien that was not paid, it will help you. For most Americans, buying a home is the single largest financial investment they will ever make. While property ownership may seem very straightforward, a homebuyer's rights to enjoy their property aren't always as clear. There are dozens of ways in which the title to a property can be jeopardized. Title insurance helps reduce the likelihood that title issues will arise, and the policies subsequently issued help protect against loss when a buyer's ownership rights are challenged. When you consider the price of homes and your equity in the home, getting an owner's policy is cheap insurance to protect your equity. If you buy it... Continue reading
Posted Mar 9, 2017 at Homes MSP Real Estate Blog
Are you looking to buy a home just outside the metro area? Depending on where you are looking, a USDA home loan may be a terrific opportunity for you. They require zero down and have low mortgage insurance. USDA loans were created to help those in rural areas purchase homes. They have many benefits - the most important one being zero down. The only other true zero down loan is a VA loan. The mortgage insurance required is less than FHA and the rates are typically comparable to FHA, lower than conventional interest rates. To find out if the area you are looking to buy in is in an eligible area, you can go to the USDA website and put in an address. It will tell you if the property is eligible. The link to the property locater is https://eligibility.sc.egov.usda.gov. There are many areas that do qualify, in Minneapolis St Paul area you can use the program in Elko New Market, Belle Plaine, Monticello, Zimmerman and Stacy. There are also income limits for the program, but they are generous - you need to be at 115% of the area median income. There is also an income tool on the website to use to see if you qualify for the program. Underwriting tends to be similar to FHA. Debt to income ratios are usually about 29% of your gross income for housing, 41% for total monthly debt including your housing. There are situations where you can go higher on ratios - it will depend on your credit, reserves after closing and overall file. The mortgage insurance changed in October of 2016. Now there is an upfront guarantee fee of 1% and a monthly fee of .35%. The upfront fee can be added to your mortgage. FHA's mortgage insurance is an upfront fee of 1.75% and monthly is .85%, so if you are looking in an area that qualifies, a USDA mortgage can save you a lot of money. If you aren't sure if you would qualify, talk to your loan officer and see if this is an option! It can be a great way to buy a home sooner than you expected! Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Mar 2, 2017 at Homes MSP Real Estate Blog
There are many that believe you need 20% down to buy a home, that is not the case but you will need private mortgage insurance (PMI). What is PMI? Private mortgage insurance is an insurance policy to protect the lender in case of default. So why should you pay for it? Many hate to pay PMI since it benefits the lender but is paid for by the buyer. The realty is that by the time most people save up the 20% needed to avoid MI, they could have bought a home, gained equity in that home and possibly had a tax break on their income taxes. Over the past five years, homes have appreciated every year and are up about 5% over the past year according to the Federal Housing Finance Agency. PMI is not a bad thing - it allows you to buy a home with as little as 3% down. PMI will also go away, you need to pay your mortgage down to 80% of the original mortgage balance to eliminate PMI after two years. After 5 years, you can get an appraisal to show an increase in value to allow you to eliminate mortgage insurance. You do need to make your payments on time and request to have the PMI removed. If you do nothing, your PMI will go away once you reach 78% of the original balance. Consider that if you are buying a $200,000 home, you would need $40,000 to avoid PMI. For most buyers, especially first time homebuyers, that is not realistic. A first time homebuyer could buy with 3% down and pay mortgage insurance much easier! If you think about how long it would take you to save $40,000, then remember that home prices are increasing, so now you will need more than $40,000 to buy the same home! Plus we expect interest rates to increase. All this means that paying PMI is not a bad thing. For some buyers with lower credit scores, FHA may be the way to go. You will still need mortgage insurance but it may be a lower payment. PMI is usually cheaper if your credit score is over 720-740. FHA mortgage insurance will be lower if your score is under 700-720. FHA mortgage insurance will not go away unless you refinance or sell your home. But depending on how long you plan to be in the home,... Continue reading
Posted Feb 23, 2017 at Homes MSP Real Estate Blog
Divorces are not fun, no one gets married to get divorced, but they do happen. Many married couples also own a home. What happens to the house when you divorce? More important - what happens to the mortgage? There are a few options and most will depend on the equity in your home, your credit scores and income. The bigger question is whether or not one person wants to stay in the home. Most divorce decrees will state that one person will get the home and the other is no longer responsible for the mortgage payment. Usually there is also a line about the person keeping the home needing to refinance within a certain time period. A refinance can be the easiest solution for both parties, especially if there is enough equity to pay off anything due to the departing spouse. However, the person keeping the home needs to be able to qualify for the home on their own. For some, losing the income of one spouse may mean you can't qualify for the home or maybe your credit isn't good enough for a new mortgage. In this case you may need to wait to refinance or you may need to sell the home. Depending on how long you have owned the home, there may not be enough equity to refinance - at least not a cash out refinance. If you have an FHA mortgage, you may be able to do a FHA streamline refinance to remove another person. However, you need to show that you have been making the payments for at least six months. It may take some time to complete this refinance, but it can be an option. If you have a VA loan, you can also do a streamline VA refinance (an IRRRL). In this case, the veteran usually needs to be the one that keeps the home. If the non-veteran is staying in the home, they will have to do another type of refiance. If you bought your home before June of 2009 and still have that mortgage, you may qualify for a HARP loan - this can make it easier to refinance if you do not have a lot of equity. What happens if you can't sell or refinance the home right away? The divorce decree will usually have wording that allows one person to stay in the home and the other person is... Continue reading
Posted Feb 16, 2017 at Homes MSP Real Estate Blog
Are you looking at your first home? Do you have lots of questions and aren't sure which way to go? Here are some suggestions to help you through the homebuying process. Talk to friends and family for suggestions on realtors and loan officers. You may need to talk to more than one loan officer - in fact I suggest it in a first time homebuyer class I teach. Not every lender has the same programs and some loan officers may not know about a program that may help you. I have had friends that work at different mortgage companies refer clients to me because I have a program that they may not have access to, I have referred clients to others lenders for the same reason. I just had a friend refer a client of hers to me today for that reason, I have access to a first time homebuyer program that she doesn't and it will help this client. Ask the lenders you talk to about first time programs and see if they work with any special programs. If they say no or aren't comfortable with first time programs, you may want to call another lender. It may be another loan officer at the same company - some times loan officers don't want to deal with programs that require special training and that's ok. Make sure you check your credit report - you can look online at www.annualcreditreport.com - it won't give you a credit score, but it is a free program that allows you to look at your report once a year. By checking it first, you know if there are any issues you need to take care of before a lender pulls your report. Have the documentation ready for your loan officer - typically you will need two years of tax returns and w'2s, 2 months of bank statements and your last two paystubs. That way your loan officer will be able to verify the income and assets you have for the purchase of a home. You may need a divorce decree or gift letter documentation - it will depend on your own situation. Make sure you are not making cash deposits into your bank account. Your lender will need to verify the money you use in the transaction and we can't verify where cash came from! Make sure you ask questions. There are first time homebuyer... Continue reading
Posted Feb 9, 2017 at Homes MSP Real Estate Blog
The Federal Reserve met this week and did not change interest rates. This was their first meeting in 2017 and the vote was unanimous to keep rates at the current level. The economy is improving but the group is uncertain about the future. Right now they are watching the economy and what happens with inflation and employment. They are reinvesting in mortgage backed bonds to keep interest rates low. The job market is improving with strong job gains in December. There is concern that the job growth may increase inflation to a level higher than the Fed is comfortable with. Wages are increasing. The Fed's job is to balance the rate of inflation and job growth. At this point, inflation is about 1.5%, the Fed wants to see it at or under 2%. The Fed will continue to watch this and slowly increase rates as needed. At this point, most investors expect another rate increase in June of this year. As interest rates increase, it can actually help homebuyers. Yes, the higher rates may affect what you can qualify for, but it also means the economy is improving. This means your investments should be doing better, there should be more consumer spending which leads to more jobs. It also can get homebuyers off the fence. We usually see potential buyers move faster when rates are increasing as they want to get the lowest possible interest rate. When rates are steady or decreasing, buyers may want to wait to see if rates drop more so they can get a better deal. This means it can be a great time to sell your home. With more people working, there is more spending and more competition for homes - this tends to push home prices up over time. This means now is the time if you are considering a home purchase. We never know what the future holds, we just know where things are at today - but the signs are leaning towards higher prices and higher interest rates. Now could be the best time for you to purchase a new home! Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Feb 2, 2017 at Homes MSP Real Estate Blog
On January 9th, HUD announced a cut in the annual (monthly) mortgage insurance fee - it was going from .85% to .60% effective with closings on January 27, 2017. It would save borrowers about $21 on every $100,000 borrowed. Shortly after the inauguration of President Trump, the new administration announced that it was rescinding that cut - at least for now. None of us really know why the cut was announced and then taken back - but for now, FHA fees stay where they were! What does that mean going forward? Should you wait to see if HUD does reduce the fee in 2017? Is there a chance that HUD may do that? The answer is possibly - but I would not wait for the fee to decrease. FHA needs to have a congressionally mandated cash reserve of 2%. They have that now - there were a few years where they didn't have it. For now, they have met the reserve requirement which is why there is a chance that after the new administration reviews numbers, we may see a decrease in the mortgage insurance. However, we also expect interest rates to increase this year and home prices have also been increasing. If you wait to see if there is a decrease, you may lose buying power based on an increase in interest rates and/or an increase in home prices. The current FHA mortgage insurance is still lower than it was for a few years. FHA rates tend to be lower than conventional rates, so for many buyers, FHA is still a great way to finance a home. For many buyers, the monthly payment may be lower than a conventional loan and with a minimum down payment of 3.5% and the ability to have a credit score as low as 580, FHA is a great way to buy a home now. Check with your loan officer and see what you can qualify for with an FHA loan - you may be shopping for a new home sooner than you think!! Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Jan 26, 2017 at Homes MSP Real Estate Blog
It's the beginning of the year and it's that time where everyone thinks about goals for the new year. Many are thinking about ways to improve their own health by better eating and exercise - what about your financial health? Are there some things you can do to help your financial health? Here are some things to consider, any one of them or all of them could help you improve your financial situation. -Create an emergency fund. One thing we know will happen in life is an unexpected event - cars breaking down, job losses, medical emergencies. A rule of thumb is to have at least six months of income set aside for emergencies. Start taking a little out of each paycheck until you reach that cushion. You may want to open a new savings account at another bank to make it harder to spend that money. If it's too easy to get into, you may spend it instead of saving it. -Pay down credit card debt. Credit cards create bad debt and that can be harmful to your financial health. Pay down your credit cards by starting with the one with the highest interest rate. Pay more than the minimum payment so you are making a dent in the principal balance. If you have high interest rates on your credit cards, you may want to see if you can transfer the balance to a zero or low interest card- but check the transfer fees to make sure it's worth doing. Sometimes you may feel it's better to pay off a smaller balance card to eliminate one card, then start working on the next one - that works too - just keep going! Once you pay off a card, take the amount you were paying on that card and add it to another card. Over time you can eliminate that credit card debt! -Save for the future. Are you saving for retirement? Use an online calculator to see what you need to save to meet your retirement goals. Don't forget to save for other expenses such as children's college funds. You may want to talk to a financial planner to get started. -Evaluate your mortgage payment. If you have had your mortgage for a while, you may want to talk to a loan officer and review it. Is it possible to refinance to save some money? Maybe you can increase... Continue reading
Posted Jan 19, 2017 at Homes MSP Real Estate Blog
There are many places to get a mortgage, you can go to a bank, mortgage lender or a mortgage broker. How do you know where to start? What's the difference? One of the best places is to get a referral from your realtor and from family and friends. Talk to different loan officers and see who you are comfortable with. Make sure the lender you pick has the programs you need. So what is the difference? A bank is simply that - an institution that lends money, usually with conventional, FHA, VA and USDA programs. Some do not have any options besides conventional financing. Typically a bank may be more conservative, but not always. Some banks may have their own programs that can be less conservative than normal conventional loans. A bank will usually underwrite and close your loan in their own name and will usually service the loan. Examples are Wells Fargo, US Bank, Citibank, etc. A mortgage banker is very similar to a bank. They have correspondent relationships with banks. They will underwrite the loan and close it in their name, after closing the loan is usually sold off to a bank for the servicing of the mortgage. The benefit to a mortgage banker is that they have more than one bank that they work with, usually have many different options for your loan. The rates may be lower due to reduced overhead. Because they work with many different lenders, they may have the ability to get a mortgage done that your bank may not be able to. A mortgage broker is similar to a mortgage banker, with several options for loans, however the big difference is they do not undewrite the loan, they usually do not close the loan in their name. A broker has to send the file to underwriting and can't control the turntime. They also do not close the loan and have to rely on the bank that is underwriting it to close the file. The servicing after closing is usually done by the company (bank) that underwrote the loan. Does it matter who does your loan? Maybe. Some times a broker may have a better interest rate but may have higher closing costs. Sometimes the mortgage banker has the best rates and they also have the ability to ask to get rushes done if need be. I have done all three (been a... Continue reading
Posted Jan 12, 2017 at Homes MSP Real Estate Blog
Fannie Mae and Freddie Mac did make some changes that may affect you for 2017, some may make it easier to get a mortgage, some might not. Fannie Mae has a property inspection waiver that may mean you do not need an appraisal on a refinance. This will show up on the DU underwriting findings for some refinancing their home. Freddie Mac has something similar called a Home Value Explorer. This won't help everyone, but for some, it may eliminate the need (and cost) of an appraisal. Mortgage limits increased for conventional loans, in this area it is $424,100 - first increase in many years. Homes in wetlands may not be approved - this is a new change as of December 2016 for Freddie Mac. For those affected by coastal tideline, wetlands or setback laws, you may find that Freddie Mac will not approve your mortgage. Fannie Mae doesn't have the same wetland requirement but does have environmental sensitive areas that will not be approved. If your home was damaged due to flooding or something similar, you may not be able to rebuild in the same area. There are also some changes in underwriting - some people may have a harder time getting a Fannie Mae loan approved compared to last year. Desktop Underwriter made some changes in the last month that have affected credit, overall credit use and their risk assessment may mean that you won't get an approval through DU. However, they also changed some other areas that may help some people with an approval. Overall, they expect the number of approvals to stay steady. Make sure you are saving bank statements, paystubs, w2's and tax forms. I have seen some clients that throw away those items and we do need them. Also if you have large cash deposits into your bank account, make sure you keep a record of where the money came from. It affects what we can use for underwriting. If you are depositing checks into your bank account, make a copy of the checks before you deposit them. If you are switching jobs, make sure you are staying in the same type of work. If you currently are hourly or salary and switch to commission income, we can't use the commission income without a two year history. Mortgage lending is always making some changes - some small, some big - if you are thinking... Continue reading
Posted Jan 5, 2017 at Homes MSP Real Estate Blog
It's hard to believe that 2017 is here - but it's only days away! There aren't too many changes for 2017 but here are some things to think about. Mortgage limits increased for conventional conforming loans to $424,100 - the first time in about 6 years that the limit has increased. FHA limits also increased their limits, in the Minneapolis metro area, the new limit is $332,350, Interest rates have also seen an increase - the Fed raised rates in December and since the election we have seen rates increase about .75%. That's a fairly large increase in a short time span. What will happen in 2017? No one knows for sure - the Fed has been talking about increasing rates 3 times, that would mean another .75%. However, we don't know that it will happen and maybe something else may affect rates and they could stabilize. This is one of those items that no one really knows until it happens! Economic news will drive the rates as will the stock market. Home prices have increased over the past year and many think they will continue to increase. Again, no one knows for sure! There are still many programs available for first time homebuyers to help with down payments. In this area, we have MN Housing and they have a couple different programs. There is also Dakota County bond money, Woodbury down payment assistance, Scott county has a program and so do a few other areas. If you are looking to buy, it's worth asking if there is a program available to help you. If you are buying outside the metro area, USDA is a great option - especially since they lowered the guarantee fees in October. That will save you money if you are looking in those areas. Right now is still a great time to buy - interest rates are still low compared to where they have been, home prices are good - all we know for sure is where the rates and prices are today, no one can guarantee what will happen moving forward! If you are thinking about buying, it's worth talking to a realtor and loan officer to see what you can do now. Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Dec 29, 2016 at Homes MSP Real Estate Blog
Fannie Mae and Freddie Mac have been participating in a program that allows homeowners to refinance their home even if they are "under water" - meaning the appraised value is not normally high enough to refinance. This program was due to expire at the end of 2016 but has been extended to September 2017. This program has gone through many changes since it was first introduced, including removing the loan to value ceiling and in some cases, the appraisal requirements. It currently allows homeowners with a loan to value greater than 80% to refinance - in many cases the loan to value may be over 100% and you can still refinance. In order to be eligible, you must have a mortgage owned by Fannie Mae or Freddie Mac, it has to be originated on or before May 31, 2009 and you must be current on your mortgage payments with no late payments in the last six months, and no more than one late in the last 12 months. Borrowers must also benefit from the refinance - such as a reduction in your monthly payment or even going from an adjustable mortgage to a fixed rate mortgage. Fannie Mae says they have helped over 2 million homeowners with this program, but they think there are at least 300,000 more loans that may be eligible. Rates have increased in the last month, but they may still be lower than the rate of your current mortgage. Homeowners that did modifications in the last few years may also be eligible for a HARP loan. Many of the modifications require interest rate resets after 5 years, until the loan reaches the market rate that existed at the time of the modification. If you did a modification, you may want to see if you are eligible for a HARP loan and permanently reduce your interest rate. If you currently own a home that has a mortgage from before 2009, you may want to see if you are eligible to refinance under the HARP loan. This may allow you to save money every month on your home! Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Dec 22, 2016 at Homes MSP Real Estate Blog
Seems like all we are talking about lately are mortgage rates - and they are on the increase again. The Federal Reserve met this week and as expected raised interest rates .25%. This was expected and many expected rates to stay steady and maybe even improve after this week's meeting. However, there were some surprises in the meeting. Sometimes it's not the amount of the increase or decrease in the rate, but the wording that the Fed gives in their reports. This one had more information about future increases and the amount of increases that lead mortgage traders to sell bonds quickly, which in turn increased interest rates. There were some investors that raised rates more than once after the report came out on Wednesday. In the Fed's report, they said that the economy is expanding at a "moderate pace", with solid job gains since the beginning of the year. Inflation is expected to rise over the "medium term". They also anticipate more frequent rate hikes in 2017. That was part of the statement that sent rates up this week. Monetary policy can take a long time to work through the economy. The rate hike in December 2015 was just starting to be felt by the market recently. They are working in the future. The Federal Reserve has been re-investing in mortgage bonds and will continue this. This does help keep rates lower than they could be. The Fed plans to continue this until the normalization of the Federal Funds Rate is well under way. Many lenders are currently offering FHA and VA rates in the high 3's to 4% range, conventional rates are slightly higher. These rates remain about half of the historical average of 8%. So rates are still very good - but on an upward swing. Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Dec 15, 2016 at Homes MSP Real Estate Blog
For the first time since the housing crisis, Federal Housing Finance Agency (FHFA) has agreed to increase the maximum conforming loan limits for loans backed by Freddie Mac and Fannie Mae. This is the first time since 2006 that the conforming limits have increased. The new limit starting in January 2017 is $424,100. The old limit of $417,000 had not changed for 10 years - it couldn't until home prices recovered to pre-crisis levels. This is important as FHFA officials have claimed that the US housing market has remained "stuck". Overall home prices have not risen past the levels of the 3rd quarter of 2007, the "official" pre-implosion level. However, the 3rd quarter of 2016 finally rose above those levels! The Home Price Index for the 3rd quarter of 2016 moved past the 3rd quarter of 2007, so loan limits could finally be raised. VA also came out with increased loan limits to match Fannie and Freddie's limit of $424,100. With VA loans, you can go above the $424,100 but you can't finance 100% over that. Once you go over $424,100 you need to make sure you have a 25% VA loan guarantee, from either the VA entitlement or down payment (or equity for refinances). FHA also increased their loan limits. In the Minneapolis St Paul metro area, the new limit will be $332,350 as of January 1, 2017. Non metro areas will be at $275,665. FHA increased their limits about $6000, so that will help many potential home owners. The new limits may help those buying near the top of the conforming limits - if you stay under $424,100, it allows for easier underwriting - usually! It also may help with lower interest rates. The new FHA limits may help those that wanted to buy a larger home but for some reason could not use conventional financing. Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Dec 8, 2016 at Homes MSP Real Estate Blog
Since the election, mortgage interest rates have risen about a half point - from around 3.625% to about 4.125% for conventional loans - all subject to your own individual situation. So what will happen in 2017? No one knows for sure and it seems like when I write this every year, we expect rates to increase. In 2016, rates started around 4% and dropped to the mid 3's. No one expected that to happen. Now rates have increased and many expect rates to increase in 2017 - but not too much. The National Association of Realtors expects rates to stay about where they are. They also feel homebuyers will be able to afford the slight increase in rates. The Mortgage Banker's Association expects rates to increase in 2017, up to close to 4.4% and may be close to 5% by the end of the year. Unemployment is down, wages are up and consumers are spending more - all those are good for the economy but bad for mortgage rates. Kiplinger (business and financial publisher) expects rates to increase further in 2017, up to about 4.3%. Their reasoning is Fed appointees that will be more likely to raise the Federal Funds Rate, more government spending and rising wages that will increase inflation. Fannie Mae and Freddie Mac also have stated they expect rates to stay low - Fannie said 3.7% but that was posted the day after the election so that may change. Freddie also said rates would stay about 3.7%, but that was in October and so we can expect an upward revision since the election. What can you do to help lower your interest rate? Make sure you put as much down as you can - you may get a better rate if you can put 20-30% down, if you have the ability to do that. Make sure your credit score is high. The higher your credit score, the better the interest rate. It may be worth paying down credit card balances to raise your credit score. You may even want to look at an adjustable rate - like a 5/1 or 7/1 ARM. Those rates may be lower and if you don't think you will be in the home for more than 5-7 years, they can be a good option. Truly no one knows for sure what will happen - until it happens - all we are doing... Continue reading
Posted Dec 1, 2016 at Homes MSP Real Estate Blog
This has been quite a year for mortgage rates - both up and down! Great Britain voted to leave the European Union, global markets were in turmoil and then the US election in November. There were analysts that thought rates would drop even more if a republican won the election. The prediction was the stock market to drop and then mortgage rates would follow and drop even lower. With a republican winning the election, it would be something different, markets wouldn't know what to expect and investors would move to the treasury, a safe haven. Instead the stock market took off and mortgage rates jumped to a seven month high! There are several things in play now for rates to continue to increase - how much, no one knows for sure. First of all, in December the Fed meets and is expected to raise rates. The economy is doing fairly well, unemployment is near 5%, it's lowest level in several years. Inflation has been in check but there are signs that it may be more of a concern. If the Fed raises rates, it could slow inflation. Investors are watching inflation also. Employment numbers are showing employee wages are rising faster than any time since 2009. As wages increase, prices for goods and services will also have to increase. Investors tend to shy away from bonds when inflation is higher. This means rates must increase to keep inflation in check. The last piece is the unexpected administration. Investors are always trying to predict the future. With a new administration, investors are not sure of the direction and so it's harder to predict the future. The predictions at this point are not rate friendly. The stock market is up, that does not help interest rates. The prediction of more defense and infrastructure spending is also not rate friendly - that typically means bond sales and if there are more bond sales, rates have to increase to make the bonds more attractive to buyers. All this means at this point, lower rates are probably not likely. However no one knows for sure. The only thing we do know is where rates are today and where they were yesterday. The market definitely took a hit this past week, it has been stabilizing a bit the last couple of days. In reality, interest rates are still great - just a bit higher than prior... Continue reading
Posted Nov 17, 2016 at Homes MSP Real Estate Blog
This has been an interesting week in politics and in honor of Veteran's Day, I decided to remind people that VA loans are a wonderful way to purchase a new home. Those that serve our country in the military have a wonderful benefit called a VA loan. It allows you to purchase a home with zero down and no monthly mortgage insurance! VA loans are typically a lower interest rate than conventional loans, there are reduced closing costs and no monthly mortgage insurance. There is a VA funding fee that is added to your mortgage. This fee will vary based on whether or not you have used the loan before and if you are making a down payment. If you are using your VA loan for the first time and putting zero down, the VA funding fee is 2.15% of the mortgage amount. However if you decide to put 5% down, it lowers your funding fee to 1.5%. If you have used your VA loan before, the VA funding fee may be as much as 3%. If you have a VA related disability, your funding fee may be reduced or waived. VA loans are assumable to anyone that can qualify for the mortgage. If you sell your home and allow someone to assume that mortgage, you do limit your access to a new VA loan. The amount of your current mortgage will affect how much you can qualify for using your VA benefits again - until that original loan is paid off. VA loans are available to those that have served in any branch of our military including the Reserves and National Guard. Unmarried surviving spouses may also be eligible. The amount of time served is what determines your eligibility. The time required is: 90 days during wartime 181 days during peacetime 6 years in the National Guard or Reserves In Minnesota, if you are a disabled vet, you may also be eligible for reduced or eliminated property taxes. Once you have purchased your home, talk to the county tax assessor to find out what you can do. There is typically a form that you need to fill in, but if you can eliminate your property taxes, that can help you lower your mortgage payment even more! If you feel you have earned your VA benefits, talk to your loan officer about the possibility of using a VA loan to... Continue reading
Posted Nov 10, 2016 at Homes MSP Real Estate Blog
The Federal Reserve met this week and decided not to raise rates this time. Their message after the meeting was that the economy continues to expand moderately and inflation is below the Fed's 2% target range. The Fed did leave many with the impression that they will raise rates in December - however it will depend on the economic data that comes out between now and then. There will be two job reports between now and the December meeting, the first one is this Friday. If those reports show the labor market improving, it will be more likely that the Fed raises rates in December. They are also watching inflation. The Fed likes to see inflation run about 2%/year and over the past few years it has been running about 1.5%. The concern is deflation if inflation runs too low for too long. Deflation can be more damaging to the economy than inflation. The Fed is concerned that falling energy and commodity costs may lead to deflation. The Fed wants to raise rates but is concerned that it could affect the economy if it does it too soon. The Fed will probably wait until they see inflation hit close to the 2% mark before they raise rates. It does take monetary policy changes a while to work through the system - sometimes close to a year. So the rate increase in December 2015 is just starting to affect businesses and consumers. The Fed will keep buying mortgage backed securities which will keep mortgage rates artificially low for some time. They expect to keep purchasing the MBS securities until the normalization of the federal funds is under way. Right now, rates are still low and they want to keep mortgage rates low to help the economy. Basically all this means is that until we see the labor market creating more jobs than expected and the inflation rate increase closer to 2%, the Fed will probably not increase rates. There is a chance that they will do something at the December meeting. Until then, expect mortgage rates to stay low. However, rates can jump quickly, so be prepared to make a move if need be! Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Nov 3, 2016 at Homes MSP Real Estate Blog
I look at credit reports every day and also get asked questions about them daily! Here are some things you should be aware of regarding your credit score. What is a credit score? It's a number between 350 and 850, based on a mathematical model that evalutes your credit report information. Mortgage scores are typically different than what you see on credit reports such as Credit Karma. The number reflects your credit worthiness. Typically the higher the number, the higher the probability that you will repay your loan on time. How are credit scores used? Credit scores are used by mortgage companies to help determine if they will loan money to someone to buy a home and at what interest rate. They are also used by insurance companies and some landlords will use them to determine if they will rent to you. Do you have more than one credit score? Yes. There are three main companies, Experian, Trans Union and Equifax. They report the information to the vendors that use the data. Each vendor may score your file slightly different. There are also different models used for auto financing, mortgages and even credit cards. Is one score better than another? It depends on what you are trying to do. Mortgage lending tends to be more of a financial forecasting - basically what are the chances you will repay your mortgage over the next 30 year. Mortgage scores tend to be more of a predictive type of score. Most lenders are using the same credit score formula as it has been fairly standard over many years. Why is the credit score I get from my credit monitoring service different than the mortgage credit score? Credit scores change frequently- sometimes daily. It depends on what is reported to the bureaus and not everyone reports to all three bureaus. So your credit monitoring service may only be looking at one report and it may not be pulled the same day as the mortgage report. Plus the mortgage report will probably have a different formula to arrive at your credit score than what the credit monitoring system has. I see this frequently - I will get a call that someone looked at their report and the score is 720, I pull the report and I get a score that may be 15-20 points lower -sometimes it higher, but usually it's lower. What is the... Continue reading
Posted Oct 27, 2016 at Homes MSP Real Estate Blog