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Leslie Vanderwerf
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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 6 days ago 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 - 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
For many years, homeowners would use the equity in their home to buy things- they would refinance and take out cash to pay off credit cards, cars or maybe do some home improvements. Then the housing market crashed and many people were under water - owing more than their home was worth. Now we are seeing people talk about increasing their home value to have more equity. Rather than mortgaging your home to the max, people are looking at paying down their mortgages and gaining equity. What are some ways you can increase your home equity? How do increase the value of your home? -Rising home prices - as home prices increase, your value goes up. This is usually one of the fastest ways your equity will increase. However, if we see another down turn, it can quickly eat up the equity you gained. -Paying your mortgage - Each month you make a house payment, you are paying something towards your principal balance, slowly gaining more equity in your home. If you can pay extra, it will increase your equity that much faster. Paying an extra house payment every year can cut about 7 years off your mortgage! -Biweekly payments - some people like to set up biweekly payments so they make lower payments every two weeks. By doing this, you are making one extra payment each year. That can help save thousands of dollars in interest. -Consider shortening your mortgage term- if you refinance your loan from a 30 yr to a 15 yr loan, you will pay off your mortgage that much faster. This is a quick way to gain more equity. You may also want to look at keeping your current loan (depending on your interest rate) and paying the equivalent of a 15 yr payment - that way you will still pay your loan off in 15 yrs, but if there is an emergency, you are not stuck to the higher payment. -Home improvements - some home improvements will increase the equity in your home. Some may be considered normal maintenance, but updating a kitchen or bathroom, maybe updaing lighting or countertops can increase the value of your home. Normal maintenance is also helpful, once you go to sell your home, you will be able to tell who has taken care of their home over the past few years. Curb appeal can also help - making... Continue reading
Posted Oct 20, 2016 at Homes MSP Real Estate Blog
The newspaper and the internet shows all these great mortgage interest rates, but when you call, your rate is higher? Why? What drives your rate higher than what is published? There are many variables when it comes to interest rates and here are a few of them. -Your credit score. Most of the rates published are assuming a credit score of 740 or higher, usually there will be something in the fine print regarding the score. If your score is lower than that, your rate will be higher. There are adjustments for scores and the lower the score, the higher the rate. -Investment property. If you do not owner occupy the property, the rate will be higher. Even if family is living in the house, if you are not the one occupying it, there is an additional cost. -Is the property a condo? Condos usually bring a higher interest rate - not a lot more, but enough that you can see a slightly higher rate, maybe about .125%. -Your loan amount. If you have a mortgage loan over $417,000, the rate is usually a bit higher. And at the same time, if the mortgage is very small, typically under $100,000, there may be an additional cost. You may want to compare rates on lower mortgages to see if you can save a bit of money. If you are looking at a mortgage over $417,000, it may be worth seeing if you can put a little more down to get your mortgage at or under $417,000. -Are you buying a duplex? Multiple unit properties such as a duplex or 4 plex will have pricing add-on's that will increase your interest rate. If you are buying the property as an investment property, the rate will be even higher. -Lender credit. Are you using a higher rate to pay your closing costs? No one wants to pay closing costs, but if you are using a lender credit, then the rate will be higher to cover those costs. These are just a few of the reasons you may not have received the advertised interest rate. It may be worth checking with a couple different lenders to see if you can get a lower rate, but make sure you are telling them what you are buying. Usually if there is a much lower rate, you may not be getting an accurate quote. The loan officer... Continue reading
Posted Oct 13, 2016 at Homes MSP Real Estate Blog
Fannie Mae rolled out changes this month for those that do not have credit scores. Prior to this update, borrowers with no credit score had to have their loan application manually underwritten and most investors would not accept these files. Now Fannie Mae has come up with an automated system to underwrite files with non-traditional credit. So if you do not have a credit score, it may be possible to buy a home now. The requirements for those without a credit score are: -10% minimun down payment -owner occupied homes only -maximum debt to income ratios of 40% (meaning your house payment and any other debt can't be more than 40% of your gross income) -maximum mortgage amount of $417,000 -purchase and rate/term refinances only -you must have two non-traditional trade lines and one must be housing related (rent, etc) If you meet these criteria, you may be able to qualify for a conventional mortgage to purchase a home. The biggest hurdle will probably be the down payment, but for some this may be the answer they have been waiting for. This does not mean that if you have several collections but no credit score that you will be able to get financed. This is for someone that does not have any credit or possibly just opened a tradeline and has no credit score. For those without credit, it may be easier to establish some credit than it will be to save up the 10% down payment. However, if you save money, this could be an alternative to getting into a new home. Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Oct 6, 2016 at Homes MSP Real Estate Blog
With low interest rates, there are many people that are looking at buying their first home. Rents are trending up and so it's a great time to look into buying. However, the question still remains - how much can I afford? What is the max I can spend and not feel house poor? One question I ask clients is "what are you comfortable spending on a house payment?" That usually answers a few questions for me. I want clients to think about their housing expenses and all their other debt. When we calculate a house payment and figure your max payment, we may not consider all your debt. Unless you have a VA or USDA loan, we do not need to consider any daycare expenses. We also don't look at your utilities, clothing, groceries, etc. So if you have an expensive cell phone bill - or maybe a high cable bill, we are not adding that into our debt to income calculations. If you know you are going to buy a new car or have a baby, we don't take those expenses into consideration. We can adjust numbers for you and let you know what you should be spending given any changes coming up, but an underwriter will not know those items. Maybe you want to save money for a college fund or retirement - you need to consider those numbers when figuring the maximum you want to spend on your house payment. The best way to figure out what you want to spend is to look through your current expenses. Look at your current rent payment, decide how much more you might be able to spend. Look at your expenses - keep a chart to figure out where your money is going. Are you spending a lot of money on non-essential items? Is there something you can cut back on? Look at your current bills- car payment, student loan payments and credit card payments - those are the items we are going to use when we figure your maximum house payment. Once you figure out what you are comfortable spending, then talk to your loan officer and decide how much you can really afford to buy. You want to make sure you are comfortable with your house payment - you are the one making it, not the realtor or loan officer. Make sure you can afford the payment and... Continue reading
Posted Sep 29, 2016 at Homes MSP Real Estate Blog
The Federal Reserve met this week to discuss monetary policy and there was a vote to see if they should raise interest rates. They voted not to raise rates, but the vote was not unanimous, it was a 7-3 vote to leave rates alone. It's been a long time since there were three that voted to increase rates, which means we could see a rate increase later this year. In its post-meeting press statement, the Federal Reserve said that the U.S economy is expanding at a "moderate pace", and inflation rates have "continued to run" below the Fed's target range of 2% over the long term. Right now the Fed wants to see if further progress is made towards it's goals before they raise rates again. The Fed's future moves will depend on where the labor market goes and the rate of inflation. There is job growth, the economy has created about 15 million new jobs since 2010, but wages are lower than the Fed would like to see. The inflation rate has also been lower than the Fed would like to see - partly due to the wages. When inflation stays low too long, it can lead to deflation which can be more damaging to the economy than inflation. The Fed did make comments about some deflationary threats to the economy, mostly regarding energy and commodity costs. They believe those will subside but are not sure how soon. The bottom line is to expect that if the economy continues to improve, the Fed will raise rates in the near future, possibly before the end of 2016 - which is coming soon! We know the Fed wants to raise rates, but they are concerned about the economy so are holding off for now. That means if you are thinking about refinancing, you should lock in soon. If you are thinking about buying, you may want to look sooner than later! Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website Continue reading
Posted Sep 22, 2016 at Homes MSP Real Estate Blog
Making extra payments on your mortgage may sound like a great idea and for some it is, but maybe not everyone. The thought of paying off your mortgage early can sound good but there are reasons that it may not make sense. For some, it's a great idea - -You can increase your net worth - your equity in the home increases and you are in a better financial position -You reduce your interest expense and can save yourself thousands of dollars in interest -The "debt stress" of knowing you have that payment to make is gone. However, there are also as many reasons not to pay off your mortgage early. How much do you have set aside in liquid savings? Do you have at least 3-6 months of salary set aside to cover emergencies? You want to make sure that if something happened to you that you can still make all your other payments. Make sure you have an emergency savings plan set up so you can eliminate that worry. Do you have other debt? Do you have credit card balances or a car payment? Those are typically higher interest than a mortgage and you can't deduct that interest payment off on your income taxes. If you have a credit card balance or car payment, work on paying those off before you pay off your mortgage. Were you looking at setting up a bi-weekly mortgage payment plan? These are designed to make one extra payment a year and make it easier to budget your mortgage payment. If you are looking at these programs, check the fees. Typically they charge a fee to do this and it may not make sense for you. You can pay more each month or make one extra payment a year and do the same thing without a fee. It won't allow you to make the bi-weekly payment, but it will still save the extra payment over a year time span. Look at your overall financial picture, you may want to talk to a financial planner to see what they recommend. Most will want you to keep 4-6 months of liquid funds for emergencies. Once you have done that and paid off higher interest credit cards, then look at paying off your mortgage. Maybe it's just adding an extra $100/month to the payment - even that will help cut interest and save you money! Leslie... Continue reading
Posted Sep 15, 2016 at Homes MSP Real Estate Blog
Getting a mortgage during a job change happens frequently, it may simply be that you are relocating with the same employer and want to buy to avoid moving twice. For some, it is an opportunity that you need to take - a higher salary or maybe a greater opportunity to move up within the new company. For most, a new job will not affect your mortgage approval. Sometimes you just need an offer letter and possibly a verification of employment showing that the new job is permanent - the offer letter should not be contingent on anything. If you have just started a new job, you will need a verification of employment and a paystub. Underwriters want to see a two year employment history. If you have been at the same job for at least two years, it's fairly easy. If you have switched jobs in the last two years, we will need to see paystubs and w2's, plus we may need a letter for any employment gaps. You may need to write an explanation letter if you have had frequent job changes. If you have had employment gaps, you will probably need at least 6 months on your current job before an underwriter approves your mortgage. Acceptable job changes are those that stay in the same line of work and are considered advancements. If you are accepting a new position with higher income and have been in the same line of work for at least two years, it can be considered a positive move to an underwriter. One of my clients just accepted a job that was more permanent than the one she had been at for over two years. This was a positive move as her hours were more steady and the pay was higher. Underwriting did not have a problem with this job change. For those that are self employed or commissioned, a job change could be an issue. If you have been a w2 employee, with a regular hourly wage and you start a job that pays commission, you will have a problem getting a mortgage. If you are getting a base salary along with commission, the underwriter will probably just use the base salary. With commission income, you need a history to show what your commision will be. Commission income will vary and so it is usually averaged over a two year time span. For... Continue reading
Posted Sep 8, 2016 at Homes MSP Real Estate Blog
I have had a couple calls recently from clients that are thinking about buying a vacation home. Maybe it's a good time to think about that! Interest rates are great, so that may make it more affordable. Home prices are increasing but you may be able to get a good buy this time of year! For some people, vacations mean traveling all over the place, for others, it's a trip up north or to a certain area every year. For those people, it may make more sense to buy their own home and have a place to go whenever they want. There are more responsibilities- you need to take care of a second home, utilities, taxes, maintenance - but for some, that doesn't matter. Maybe you have a favorite lake - a home on that lake may be a perfect spot for a second home. You may be able to rent out the home at times to help offset the cost. You may also be able to write off the mortgage interest on your taxes, that can also help offset your costs. So how do you qualify for the second home? Truly, the same way you qualify for a regular mortgage - you need to make sure you have the income to qualify, just like your primary residence. You will also need money for the down payment. On a primary residence, you can buy a home with as little as 3% down, for a second home you will need at least 10% down. If you are going to rent out the home, it becomes an investment property and you will need at least 20% down. But as an investment property, you may be able to use the potential rent as income to help qualify for the home. Where does the money come from for the down payment? Many people may have saved money to use for the down payment. Others will take equity from their primary residence to use for the down payment. Either one will work as long as you qualify for the total payments. Maybe you have enough equity in your home to pay for the 2nd home, that will help cut the cost of a new mortgage on the second home. For those thinking about a vacation spot, this may be a great time to buy. Rates are still low, home prices are on the rise, but... Continue reading
Posted Sep 1, 2016 at Homes MSP Real Estate Blog