First Stop 4 Home Loans

Most of us would like to think so.  I’ve watched that show a few times and have thought “I don’t remember learning that”.  Of course, that was over 30 years ago.  Wow am I old!  What I do remember as a 5th grader is breaking my leg and being the first person to ride in our new elevator.  Oh yeah, that was the coolest.  I had a special key and everything — such privilege!   Now, breaking the leg on a school event and being taken to the hospital in a bus… not so much!  I was heckled quite a bit during that time.  Hey, maybe that’s why I don’t remember learning certain things … I was too traumatized by the mean kids.  Ha!

So seriously, why start a post with this?  As a home buyer, especially those of you looking to buy for your first time, you “learn” a lot about the process, like what lender to use, what to ask when comparing loans and other wonderful tips, mostly from friends, family and co-workers.  I am here to tell you that though they may seem to know the ropes, it doesn’t mean their situation matches yours.  There are plenty of things you can teach them. 

For instance, you may be advised to ask what rates are when narrowing down what lender you want to use.  Knowing the rates is a very smart thing to do.  But, realizing why this question isn’t valid is smarter.  On any given day, rates can change.  One lender can be higher or lower than another and change positions within the same day.  There are many loan officers out there that will quote you an interest rate that “teases” you into wanting to work with them.  Truth of the matter is rates don’t matter one iota unless you have a purchase agreement accepted on a home and you can lock that minute.  Until that time, lenders can tell you whatever they want.  Notice I am being general here.  I am of the mindset that starting honest is a good thing — not only that, there is always a little fear I have, that indeed, you will call back (good thing) and I have to abide by my rate commitment (not so good if I under-quoted).  And so you know, many first time buyer programs have their own rates tied to them.  So regardless of what lender you use, the rate is the rate.  No variance.  This means even though you’re doing an FHA loan, you won’t be quoted an FHA rate, but that of the first time buyer loan program.  And, this also assumes the lender you called can and is willing to do these loans.  Many don’t and will give you bad information to steer you from something that may be the BEST deal for you overall.

Okay, if the rate is the same because you’re going with the first time program, then what else should you compare?  You may be advised to compare closing  costs by getting a good faith estimate.  Again, smart idea to check costs between lenders, but this isn’t the end all for making a decision.  Here’s a question … what is it worth to you to get your loan closed on time or at all for that matter?  Tough to answer since you might not be at that point yet.  I will say that it’s worth it’s weight in gold.  Trust me on this.  In the 16 years I have originated, I have had many people jump ship after I’ve spent hours educating and being there to answer their questions, just to save 1/8% in rate or $500 in closing costs.  And you know what?  I can honestly say that a good number of them call back complaining about one thing or another with the other lender stating they “wish they had stayed with me”.  Nice compliment, but they don’t pay the bills.  Compare your costs; go ahead.  Just remember it’s tough to put a dollar figure on reaching your dream of home ownership.

What else are you hearing?  Had anyone suggested working with a broker because they can “shop” to find you the best rate?  Or maybe they’re suggesting you go with a bank, a lender that does everything in-house.  All good advice.  Keep in mind; you are getting this advice due to that person’s experience with THEIR process.  Gosh, I can’t tell you how many people say to me during a meeting “my friend got this rate” or “my friend only needed to put xxx% down”.  Yes, their friend probably had that experience.  Back to it being THEIR process.  On conventional financing, for example, depending on the amount down and your credit score, you could pay a higher rate than someone whose score is higher.  It’s reality.  Or maybe they “financed” their closing costs so you should too.  Want the education here so you are smarter than the 5th grader — ie your friend, family or co-worker?  Closing costs cannot be financed in the way you may think.  The only way to “finance” costs is to have the seller pay them.  So why would that make them financed if the seller pays them?  As a good student, that is a brilliant question.  Let’s say the house you want is $100,000.  When you make your offer, you ask the seller to pay $3000 toward your costs; the seller agrees.  What did they just agree to?  Making $100.000 on their home or making $97,000?  You got it, the lesser figure.  Essentially, then, you could have paid $97,000 for the home, asking for nothing, and they would have agreed.  Indeed, you are “financing” the costs in this respect.

Okay, off subject on the last one.  It doesn’t necessarily matter what type of lender you choose.  You want someone reputable, honest, knowledgeable about the first time buyer programs, as well as forthcoming with information on them; and most importantly, you want your deal to go smoothly.  All lenders have their down sides.  A bank just offers one product.  A broker gives you options.  Sometimes, this really means the broker has more opportunities to make more money on your loan (which you won’t know and really don’t care if you’re getting what you want for terms and customer service).  Could you get all these things under one roof?  Of course you can!!  We, among a few other lenders, offer both– the security of having in-house processing and underwriting, so control of the process, along with options.  And when searching your options, don’t forget to ask about the first time programs.  If you really want to test their knowledge, let them know you’re a first time buyer and see if they offer programs that would suit your situation. If not, then I submit to you to take a pass on that lender.  They won’t be working in your best interest.

I know there’s more to being smarter than a 5th grader and plenty more scenarios I can throw at you.  Bottom line … make sure your questions are handled, options are proposed and the company has enough support to handle your loan through the process.  Oh, and tell your friends, family and co-workers “thank you” for their advice and let them  know you’ve got your situation handled.  There are other ways to put this, but if you still want to keep them as friends … you may want to tread lightly!  Oh, and one last thought. By no means am I saying to stop listening.  Some advice will be good; it’s just choosing what advice to listen to.  Good luck!

Lucky you!  There are many buyers these days getting financial  help from family.  I want to give you a few tips on getting gifts for your home buying process.  Not all programs allow gifts or have the same “rules” on the process.  In this tips & tidbits, I will address gifts for FHA loan types since these make up over 75% of my current business.

• gifts can only come from family members
• gifts CAN cover all of your down payment and closing costs, unless the program requires a minimum investment, like the Dakota County Bond Program
• don’t deposit gift money into your accounts until you’ve discussed this with your loan officer
• the funds for the gifts WILL be tracked — not only into your account, but proof will be requested from your family to prove they had the money to give you (there are specific guidelines to follow)
• cash is not an acceptable gift
• if demonstrated, gifts could come from a non-family member, i.e. fiance or partner (certain documentation will be required)
• unsecured, borrowed funds are not acceptable sources of gifts

These are a few things that come to mind when advising on gifts.  Maybe you’re asking why even address this?  Here’s the thing, in the 16 years I’ve done this, I’ve seen way too many times when a loan file gets hampered by doing the wrong thing with gift money.  It’s my goal to give you the best advice possible so this doesn’t happen to you.  It’s already a stressful situation buying your first home, it certainly doesn’t need to be worsened by having to create a paper-trail for something that already happened.  Better to know what is expected of you on the FRONT end of your home-buying process then coming to you and your family at the end asking for more paperwork.  Oh how fun!

Moral of this tip — please be upfront with your intentions to get a gift and hopefully you will be given the right advice the first time!

If it wasn’t great enough that we just got a new issuance of money in the Dakota County area; we now have NEW first time buyer money in the Minnapolis and St. Paul area under the City Living Program. This money is just available in the geographical limits of the Minneapolis and St. Paul area, so no other areas of Hennepin County or Ramsey.  Having this program available is such good news. 

How do you qualify for this?  First, you must be a first time buyer, someone who has not owned a primary residence in the last THREE years.  There are income limits you must fall under and HOUSEHOLD income is calculated off all members in the household over age 18.  Here are the limits:

83,900   1-2 person household

92,290   3+ person household

There is also a purchase price limit of $376,870.  You cannot go over $1 above this!  I don’t think you’ll have any problem since this limit is quite sufficient to handle any properties that are perfect for first time home owners.  The sale price/purchase price limit is $376,870.  Another thing to know is NO personal property can be included in your purchase agreement.  That means anything that isn’t attached to the home — applicances are the most commom.  Don’t panic though — you will still be able to get these things agreed upon.  You definitely want to make sure you’re working with a knowledgable agent in this area.  I have a few partners that I can highly recommend!

Want the REALLY, REALLY good news?  Rates … and it’s all about rates isn’t it?  It shouldn’t be; but again, that’s another post.  Please note that you still must qualify for a regular loan.  Here’s the way I like to explain this.  As a buyer, you need to qualify or meet the guidelines for an FHA, VA or conventional loan.  Let’s call this the “Cake” you’re dying to eat!  Once you’ve got this qualification, then we can see if you meet the guidelines for the City Living program, which we’ll call the “Icing”.  If you’re like me — cake is ONLY good with icing!  So, again, you have to qualify for the cake and then have to meet the qualifications to get the icing drizzled all over it.  Nummy.  The “Sweet” taste of this is a rate of 4.75% on a 30-year OR a rate of 4.99% WITH 2% of the loan amount to be used toward down payment or closing costs.  Another important point, you DO need $750 of your own  money into the transaction, which cannot be a gift. 

They will FORGIVE this second loan if you occupy the home for 7 years.  If you sell under this time, the full amount you got for the second loan is due.  Fortunately, this loan is 0% interest and NO payments are ever due during your loan.  It’s like getting a “loan” from Mom and Dad — “just pay us back when you’re done with it”.  So, you sell, you pay back.

Since this is a first come first serve program, you definitely want to make sure that you’re not only pre-approved with a lender that knows these programs, but also knows how to explain the important nuances of them.  I can help you navigate the waters and make sure you’re sailing strong  during your trip as a first time home owner!!!!!!!

Did you know the government extended the first time buyer tax credit?  How about the fact that not all lenders offer down payment assistance programs or first time buyer programs?  It’s pretty amazing to know you’re essentially getting paid to buy a home.  Crazy, isn’t it?  There are many people out there, maybe you included, that have a desire to own a home, but sit on the sidelines due to uncertainty, lack of knowledge of the process or being gun-shy due to stories about another person’s bad home buying experience.  It doesn’t have to be this way!  Buying your first home should be educational, pain-free and believe it or not, FUN!  It’s sad how many people go through this experience without knowing the facts, being given options on first time buyer programs or being led through the process, not slammed into the system of homeownership. 

How would you like to get a grip on your first home-buying experience?  We’d love to help you navigate through this process — educate you, with NO obligation, on the steps you will take to become a homeowner — from the first step of pre-approval to the last step of closing on your home and getting the keys!  Oh, and did I mention it’s FREE*?

We have TWO seminars coming up in February.  These are the same seminars, so feel free to pick the one that fits with your work or home location. 

The South metro seminar is on Thursday the 18th from 6:30-8pm at the Cornerstone Mortgage office located at 436 Gateway Blvd. in Burnsville.  I will be presenting these steps with Realtor, Steve Howe, of the Minnesota Real Estate Team.  The two of us will help you take that first step to home ownership. 

If the North metro is a better fit, then join us Thursday the 25th from 6:30-8pm at the Shoreview Community Center — 4580 Victoria St N #203.  Again, Steve and I will be presenting.  This time we’ll be joined by Realtor, Tony D’Agostino, also with the Minnesota Real Estate Team.  Trust me — you will go away knowing so much more about the process AND will feel more comfortable now that you’re armed with information – info that many lenders just don’t share!!  Both will be a fun and educational evening. 

Please register by calling 952-808-0042 as space is limited.  Hope to see you there!

*ALL of our team’s seminars are FREE of charge. Cornerstone Mortgage is proud to be a drop-off site for the CAP agency, which is a non-profit organization that collects food items and gently used clothing for Scott, Carver and Dakota Counties. If you can, please donate a canned food item, baby food or clean clothing so we can continue to support the families in need!

Can you say FINALLY???  We have been waiting patiently, or maybe for some, impatiently, for more money to come available.  It’s here.  And a week later, you will see money come out in the cities of St. Paul and Minneapolis for the City Living program – very similar to this.

The skinny on this first time buyer program?  Well, you need to be one, which means you could not have owned a home in the last 3 years.  Because this is a bond program, you will be offered a lower than market rate and good news … it doesn’t change with market volatility.  The rate is 4.99% AND depending on your household income, you could qualify for up to $10000 in down payment assistance.  The first time buyer assistance isn’t forgivable, meaning you need to pay the zero interest, down payment money back when you sell.  If you get $7000, then you pay back $7000.  It’s pretty cool — here’s money to help and just give it back when you’re done using it.  Oh is this awesome!

There are sale price and income limits for this program, as with all bond programs.

$83,900 1-2 person household

$92,290 3+ household

Maximum Sale price is $276,683

This isn’t like the other first time program they had called Silver Lining.  It’s not as restrictive.  No crazy strings like the house needs to appraise at 1% higher than the purchase price and there is no requirement for a special home inspection.  One thing that IS required is you have to attend the Homestretch class where you can sign up at http://www.hocmn.org .  If you’ve taken this course, it’s acceptable to use your current certificate of completion pending it’s not over a year old from the date of closing on a house.

So, now you have the AFTER closing tax credit up to $8000 and you can get up to $10000 BEFORE your purchase to use toward down payment and closing costs.  By all means, please call if you have any questions or want to take advantage of this program.  It’s first come first serve, so get out there and buy some of those great deals in Dakota County.  Oh and one important point, you DO need $750 of your own  money into the transaction.  This cannot be a gift.

By the way, not all lenders have access to this program.  Make sure you’re working with an expert in first time buyer programs.  It’s important you’re educated on how the program works, what the recapture tax is and other parameters for the program.