Do You Understand the Mortgage Process?

Most first time home buyers are clueless about the mortgage process and rightfully so! The process can be complicated and daunting and it's not something you go through often.
Even homeowners that haven't moved in a while can find all the changes in the process overwhelming or confusing.  Check out this infographic from KCM to get you "in the know" about the mortgage process basics.

Need a list of lenders? Click HERE.

Are you thinking about moving up from your starter home to your next home and not sure where to start?  Check out the-process-of-moving-up-to-bigger-home.

Are you a first time buyer looking for someone to help you through the process? Contact me today!

Can you buy a home with only 3% down?

   

What causes closing delays in home sales?

The Most Common Delays Toward Closing on a Home

About 60 percent of REALTORS® reporting on their last contract indicated that the contract had some type of issue:

• financing issues,
• home inspection issues,
• appraisal issues, 
• buying/selling distressed property, 
• tilting and deed issues, 
• or with contingencies stated in the contract.

With all the talk about the difficulty in obtaining a mortgage, only 12 percent of contracts that were reported to have settled or terminated had financing issues. One possible explanation noted may be that potential homebuyers are deciding to wait for now, so these buyers were not captured in the data.

Need help with buying or selling a home? Call me!

Sources: http://realtormag.realtor.org/daily-news/2015/06/09/most-common-delays-toward-closing
http://economistsoutlook.blogs.realtor.org/2015/06/08/64-percent-of-contracts-are-settled-on-time/

Links you may enjoy:
Housing Market Updates  |  Getting the Best Price for your Home  |  Getting pre-approved  |  Homes for Sale  |  What is Your Home Worth  |  Why Call Sarah First

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SHOULD is now MUST in the FHA Handbook

It's likely you won't hear this on the 5 o'clock news but it's important to people considering buying or refinishing their home. After reading this you may want to look into all types of loan products available.

The 4155 is the FHA handbook. Changes have been made to the Federal Housing Administration's (FHA)  handbook and the word MUST now shows up 2669 times with regards to FHA appraisals where it previously said SHOULD.

This gives appraisers a lot more work they MUST focus on... A lot more work and technically a lot less leniency means higher costs for FHA appraisals. Which will likely be passed on to the buyer raising their closing costs. Plus, all this "MUST" is distracting for the big picture, finding the right value.

So that in addition to the high FHA mortgage insurance premiums makes FHA loans even more expensive and less appealing.

It seems clear that all these changes are being enacted to push people away from FHA mortgages.

Since you can now get conventional loans with as little as 5% down, the only reason left to consider FHA is having a low credit score.

So what's that you say? How do you improve your credit and avoid FHA?

READ MORE: 

Need another reason to avoid FHA? More sellers are deciding not to accept offers from buyers using FHA financing due to the strict property condition guidelines. Making FHA buyers have fewer properties to choose from when looking for a home.

More HOME BUYING HELP:

8 Things you Must Know About Getting a Mortgage

Resources: http://portal.hud.gov/hudportal/documents/huddoc?id=SFH_POLI_APPR_PROP.pdf

Can you buy a home with only 3% down?

Are you (or your spouse) a first time home buyer? Are you put off by all the mortgage insurance and conditions that apply to FHA loans?
Are you looking to refinance into a fixed rate 15 or 30 year mortgage but have little equity?
You are in luck!

In December, Fannie Mae announced they will offer 97% LTV (loan to value) conventional financing to help home buyers who would otherwise qualify for a mortgage but may not have the resources for a larger down payment.

In many cases, the Conventional 97 program is less expensive than an FHA mortgage. This is because the Conventional 97 program does not require an upfront mortgage insurance premium, and because its annual mortgage insurance rates are cheaper, too. Mortgage rates are often comparable.

Conventional financing does not handcuff borrowers to mortgage insurance forever like FHA MIP does. Once equity targets (20% – 22%) are reached, current appraisal supported value can eliminate conventional PMI (Private Mortgage Insurance). Not so with that FHA MIP, once you get it, the only way to get rid of it is to refinance out of the FHA loan or sell the house!

The Conventional 97 program requires a minimum credit score, which varies by downpayment source. All mortgage applicants must show a credit score of 680 or better. However, mortgage applicants accepting gift funds for a downpayment must show a credit score of at least 740. Your credit score is based on the middle of your three credit scores, as reported by the major credit bureaus TransUnion, Equifax and Experian.

I know you want to know more about this and I have lenders that can help you.

Contact me today!

See Other Types of Loan Products and more Home Buying Help

What Type of Mortgage Lender is Right For You?

Before you choose a lender, you may want to know what type of loan products are available.  Reviewing these before you talk to lenders will make the conversation less intimidating and you will be more aware of the options you may be looking for... or missing out on.

 A qualified residential mortgage company can suggest several ways to ensure you get the home of your dreams and provide advice regarding strategies such as pre-qualification, pre-approval, rate locks, and work with good real estate agents, home inspections and insurance providers.

  Residential mortgage companies should NOT be evaluated solely on their rates but consider that larger mortgage firms are able to leverage national operations to provide the best financing for their customers. Like any other field, economies-of-scale make a difference for lenders and borrowers alike.

Top residential mortgage companies evaluate applications on a case-by-case basis taking into account factors such as extenuating circumstances, long-term stability, community reputation and other variables.  Mortgage companies evaluate changes in circumstances such as income or just passage of time as well as good-faith efforts prior to foreclosure. People who have been cheated by unscrupulous lenders with adjustable rate mortgages may find little-to-no future penalty. These are the best companies to consult regarding residential mortgages. The test of quality is a often a test of time.

The residential mortgage market offers several unique structural, legal and procedural opportunities and restrictions. A company specializing in residential mortgages should always be preferred.

 So, which one is right for you? Let's take a look at the options.

 Mortgage banks 

A mortgage bank is a direct lender; that is, bank employees alone review your application and make the decision to lend you money. Typically, the bank will sell your loan on the secondary market. Benefits of a mortgage bank:
 Reliability: You probably know and trust your local mortgage bank. It is regulated by state and federal agencies and likely has strong ties with your community.
One-stop shopping: You deal directly with the source of your loan.
Savings: As the loan originator, a bank may save you money in the loan process and/or offer you better terms based on your total assets on deposit with the bank.
Speed: A bank also may process your loan faster than other providers.
Risks of a mortgage bank: 
Limited choice: Mortgage bankers only offer their own programs. To comparison shop, you will need to speak with several lenders.

Mortgage brokers 

A mortgage broker is a middleman who may represent the mortgage loan products of hundreds of different lenders. The broker's goal is to match you with the loan product that best meets your needs at the best price. Once your loan is approved, you will usually deal directly with the loan originator or their mortgage service provider.
 Benefits of a mortgage broker: 
Variety: By shopping across a range of different programs and lenders, a mortgage broker may find you a better fit than a mortgage bank.
Qualifying: A mortgage broker can best steer you to the national or regional lenders that are most likely to accept your application based on your financial and personal information.
Savings: You may get a more favorable loan rate.
Speed: A broker saves you time shopping for a loan.
Risks of a mortgage broker: 
Hidden costs: Some mortgage brokers attempt to increase their profit by writing hidden costs into your loan.
Best hedge: know the loan process and ask questions.
Professional oversight: Unlike mortgage bankers, mortgage brokers are not subject to licensing and regulation in all states.

Your Local Bank or Credit Union

Most financial institutions offer a limited menu of loan products, just as mortgage banks do. They typically hold mortgages in their portfolios or sell them on the secondary market.

Home builders and real estate agencies 

Many large home builders and real estate agencies now own an in-house mortgage company to make it easier to buy their properties. These affiliated companies may operate as a mortgage banker or broker.

 Internet lenders 

Mortgage lenders have proliferated on the Internet in recent years, offering fast, easy loans at competitive rates. Some are online channels of brick-and-mortar financial institutions or mortgage brokers, others are Internet-based banks or brokers. Which lender is right for you? Depending on your credit history and circumstances, you may benefit by using one source of mortgage loans over another.

What kind of borrower are you?

Excellent credit, easy access to financial documents, longtime employee of one company.
Best source to shop: Internet lender, bank or mortgage bank.

Self-employed borrower, don't want to share data about income or assets with mortgage provider.
Best source to shop: Mortgage broker.

Repeat home shopper, rate-and-term refinance customer, financially savvy.
Best source to shop: Internet lender.

ARM shopper, relationship customer with many accounts at one institution.
Best source to shop: Bank, thrift.

Convenience shopper, wants easiest loan to get even if it costs more.
Best source to shop: Home builder or real estate agency lender.


Need more mortgage information?  Send me a message today or call me for answers.
Additional Home Buying Tips




 Sources:  http://www.bankrate.com/finance/mortgages/which-type-of-lender-is-right-for-you--1.aspx#ixzz3NI2Nis9H 

Collateral Underwriting: Will It Affect Your Home Sale or Purchase in 2015?

Collateral Underwriting: Will It Affect Your Home Sale or Purchase in 2015?

Collateral Underwriter is Fannie Mae’s (and Freddie MAC) new proprietary ‘risk management’ software tool they are releasing to lenders and their business partners, Appraisal Management Companies (AMCs), on January 26, 2015. Fannie Mae claims it is NOT an AVM (Automated Valuation Model) because it does not produce a proscribed value (like other mostly inaccurate online valuation tools do).

The bottom line is that this new program could hold prices down... or even bring them down.  Plus, buyers may get stuck footing the bill for the extra work the appraiser has to do. :-(


Sources:
http://turnersappraisals.com/fannie-mae-to-pick-lowest-risk-comparables-for-appraisers/
Video:  http://thenationalrealestatepost.com/appraisal-time-bomb-coming-in-january-2015/

Do You Need Help with Your Down Payment?

Find out NOW if you can get help
with your down payment on a
Twin Cities home!

Down Payment Money Is Available!

Looking for some help with your down payment for help on a home purchase in the Twin Cities area?  Down Payment Resource maybe be your answer!

Whether you are just beginning your home search or you are struggling to find a home you can afford, it's worth a look to check out the DPR website and find out what programs you may qualify to use.

Need help navigating the changing Twin Cities Real Estate Market? Contact Me!

Don't Make These 7 Home Mortgage Loan Mistakes

Are you making mortgage mistakes?

There are a number of mistakes you can make along the way of getting your mortgage loan approved and once you have a loan.  Buying a home is complex enough but when it comes to financing, you need to make sure you are as prepared as possible in order to get a loan and make the payments.

1. Don't lie on your loan application: 

Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense. Lenders rarely prosecute liars but if they find out later, they can call your loan due and payable. Don't ever sign your name to a loan application that is not completely filled out, either. Loan officers have been known to stretch the truth to get a client approved, but it's the borrowers who end up paying the price, often in the form of monthly loan payments they can't afford.

2. Don't confuse "pre-approved" and "pre-qualified" with a loan commitment: 

When you are "pre-qualified," the lender is making an educated guess about how much you can borrow based on information you've provided. When you are "pre-approved," the lender has verified everything you've provided and is offering to lend you up to a given amount at current interest rates -- under certain conditions. It's much better to be pre-approved when shopping for a home because both you, your real estate agent and the seller know what you can afford. Whether pre-qualified or pre-approved, final clearance and a check at closing -- a loan commitment -- are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check, and other verifications. When meeting with lenders, always ask what additional steps will be required to obtain a loan.

3. Don't have too much credit: 

Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you and your debt-to-income ratio as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any big-ticket purchases until after you buy your house.

4. Don't choose the wrong mortgage: 

Home loans may no longer be the lifetime obligations they used to be but still -- you don't want to be saddled for even a short period of time with the wrong one. Investigate all of your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios. Be sure to look at down payment, initial interest rates, future interest rates and payments (if different), mortgage insurance, and the possibility, though now rare, of prepayment penalties.

5. Don't burn your mortgage: 

It's a wonderful feeling when you make your last house payment. After all, the place is now yours, all yours. Many people celebrate by holding a mortgage burning party. But they torch the original document. Don't. Make a copy and burn that instead. Keep all your loan docs in a safe place.

6. Don't dodge the lender if you can't make your payments: 

Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure. But they can't do anything for you unless they can talk to you about your difficulties. Lenders are the enemy only if you give them no other choice. The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments.

7. Don't refinance just to get a lower interest rate unless you plan to stay long term:

Every time you get a new loan, which is what refinancing is, you have to "close" again. Every closing comes with closing costs.  High loan closing costs can outweigh the benefits of lower rates if you plan to move soon.

If you are refinancing to pull equity out of your home or roll in some other debt, think twice.  Without any equity, you could be in a world of trouble if a life change forces you to need to sell quickly.

Looking for a reputable mortgage professional to help you through the process?

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Home loan applicants must read this today!

Hurry! You only have until the 16th to get your application in!

There have been recent updates to the Fannie Mae guidelines for waiting period on short sale and pre-foreclosure applicants.

If you were trying to qualify under the two year waiting period at 80 loan to value per the current guidelines you only have until the 16th to get your application through!

 D. Benjamin Harris

Mortgages: Types of loan products are available

So, You Need To Get A Home Loan

If you want to buy a house and you don't have enough cash in the bank, you'll need to get a home loan.  In addition to comparing mortgage lenders, you'll have three main considerations when choosing your loan.

1) Government-Insured vs. Conventional Loans

So you'll have to choose between a fixed and adjustable-rate type of mortgage, as explained in the previous section. But there are other choices as well. You'll also have to decide whether you want to use a government-insured home loan (such as FHA or VA), or a conventional "regular" type of loan. The differences between these two mortgage types are covered below.

Government-Insured vs. Conventional Loans

A conventional home loan is one that is not insured or guaranteed by the federal government in any way. This distinguishes it from the three government-backed mortgage types explained below (FHA, VA and USDA).

Government-insured home loans include the following:
FHA Loans
The Federal Housing Administration (FHA) mortgage insurance program is managed by the Department of Housing and Urban Development (HUD), which is a department of the federal government. FHA loans are available to all types of borrowers, not just first-time buyers. The government insures the lender against losses that might result from borrower default. Advantage: This program allows you to make a down payment as low as 3.5% of the purchase price. Disadvantage: You'll have to pay for mortgage insurance, which will increase the size of your monthly payments. See also: Pros and Cons of First-Time Homebuyer Loans on Realtor.com

VA Loans
The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government. This means the VA will reimburse the lender for any losses that may result from borrower default. The primary advantage of this program (and it's a big one) is that borrowers can receive 100% financing for the purchase of a home. That means no down payment whatsoever.
Learn more: VA loan eligibility requirements

USDA / RD Loans
The United States Department of Agriculture (USDA) offers a loan program for rural borrowers who meet certain income requirements. This is sometimes referred to as an "RD loan" or "Rural Development loan." The program is managed by the Rural Housing Service (RHS), which is part of the Department of Agriculture. This type of mortgage loan is offered to "rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing." Income must be no higher than 115% of the adjusted area median income [AMI]. The AMI varies by county.
Learn more about using a USDA loan in Minnesota: USDA borrower eligibility website

Combining: It's important to note that borrowers can combine the types of mortgage types explained above. For example, you might choose an FHA loan with a fixed interest rate, or a conventional home loan with an adjustable rate (ARM).

(It's more than just getting a loan. Find more home buying help!)

2) Jumbo vs. Conforming Loan

There is another distinction that needs to be made, and it's based on the size of the loan. Depending on the amount you are trying to borrow, you might fall into either the jumbo or conforming category.

Here's the difference between these two mortgage types.
A conforming loan is one that meets the underwriting guidelines of Fannie Mae or Freddie Mac, particularly where size is concerned. Fannie and Freddie are the two government-controlled corporations that purchase and sell mortgage-backed securities (MBS). Simply put, they buy loans from the lenders who generate them, and then sell them to investors via Wall Street. A conforming loan falls within their maximum size limits, and otherwise "conforms" to pre-established criteria.

A jumbo loan, on the other hand, exceeds the conforming loan limits established by Fannie Mae and Freddie Mac. This type of mortgage represents a higher risk for the lender, mainly due to its size. As a result, jumbo borrowers typically must have excellent credit and larger down payments, when compared to conforming loans. Interest rates are generally higher with the jumbo products, as well.

3) Adjustable vs. Fixed Rate

 All loans fit into one of these two categories (or a combination "hybrid" category). Do you want a fixed-rate or an adjustable-rate mortgage loan?  Both of these types of mortgages have certain pros and cons associated with them.

Here are the pros and cons in a nutshell: The ARM loan starts off with a lower rate than the fixed type of loan, but it has the uncertainty of adjustments later on. With an adjustable mortgage product, the rate and monthly payments can rise over time. The primary benefit of a fixed loan is that the rate and monthly payments never change. But you will pay for that stability through higher interest charges, when compared to the initial rate of an ARM.

To further explain, here's the primary difference between the two types:

Adjustable-rate mortgage loans (ARMs) have an interest rate that will change or "adjust" from time to time. Typically, the rate on an ARM will change every year after an initial period of remaining fixed. It is therefore referred to as a "hybrid" product. A hybrid ARM loan is one that starts off with a fixed or unchanging interest rate, before switching over to an adjustable rate. For instance, the 5/1 ARM loan carries a fixed rate of interest for the first five years, after which it begins to adjust every one year, or annually. That's what the 5 and the 1 signify in the name.

Fixed-rate mortgage loans have the same interest rate for the entire repayment term. Because of this, the size of your monthly payment will stay the same, month after month, and year after year. It will never change. This is true even for long-term financing options, such as the 30-year fixed-rate loan. It has the same interest rate, and the same monthly payment, for the entire term.


Looking for more information on getting a mortgage in MN?  Contact me and I will be glad to refer you to great Twin Cities lenders.

 

Other article sources: http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz3NI6VcPF5

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