First Stop 4 Home Loans

A quick look at the rates today for the MN Housing programs sent us all into an uproar at the office.  MN Housing is quoting 3.75%* for a government 30 year (yes, 30 years, not 15), fixed rate.  This is for their MMP program which doesn’t require the 8-hour Homestretch class, offers no down payment assistance, but DOES offer a great rate.  And when I say great rate, I mean “out-of-this-world-I-can’t-believe-it’s-not-an-adjustable-rate-Macaulay-Culkin-shocked-look” rate.  This is off the charts.  Who would have guessed we would not only see rates this low, BUT, see them on the special first time buyer programs?  Certainly not me!!

Let’s look at some figures using a loan amount of $150,000 (these estimates do NOT include taxes, insurance, mortgage insurance or dues):

• Rate:  3.75%**
• Principal and interest:  $695
• Total interest over 30 years:  $100,042

Compare this to the rate prior to 4 PM today …

• Rate:  4.25%**
• Principal and interest:  $738
• Total interest over 30 years:  $115647

So, the monthy savings is just $43/month, which means $516 a year.  Okay, so not really a HUGE difference; BUT, check out the 30 year savings in interest — over $15,000.  That’s just crazy!  You could take that $43/mo and add another $6000 or so to your purchase price.  That may be worth it just to get into another price bracket.

So what about the zero down payment program?  That rate came down too — also by 1/2%  — from 5% to 4.5%**  Remember, this program’s primary benefit, other than NO down payment, is that there is no private mortgage insurance (PMI).  A regular 30 year right now is about 4.5% or less without using a first time program.  Well, if you had less than 20% down, you would be required to have PMI.  On the above $150,000 loan the PMI would be about $65 in  your payment, eating away at what you could afford.

We are in some crazy times right now, but I cannot say it enough — NOW IS THE TIME to buy a home.  There hasn’t been, and will probably never be, another time in our lifetime to have so many benefits — low rates, low home prices and many special first time buyer programs just waiting to help you get into your first home.  Let me be the one to do that too!

*Rates are subject to change without notice.  This is not an offer to enter into an agreement.  **Assuming 5 days of interest on a $150,000 loan amount, the APR for these rates are 3.899%, 4.403% and 4.656% respectively

Are you a first time buyer just waiting to get a home?  Are you trying to save, but finding it tough to do with all your other obligations?  MN Housing has come to the rescue!  Starting around August 16th, with a signed purchase agreement, you’ll be able to obtain 100% financing on a conventional loan.  This just may make it easier to get a loan on some of those homes not allowing FHA financing.

Thankfully, MN Housing realized there was a huge need to bring this back to the first time buyer.  Currently, the most minimum down payment you can do is an FHA loan — 3.5% down.  Conventional financing does allow for 3% down, but the private mortgage insurance is higher.  Due to this, and the fact that MN Housing offers a lower rate on FHA, the payment is lower than a conventional MN Housing loan. 

Now, we finally have a conventional alternative where the payment IS less than FHA!!!  Here are the parameters to the program:

• NO down payment
• NO monthly mortgage insurance
• Must be first time homebuyer
• Maximum household income 1-4 person $83,900
• One unit home, townhome or condo
• Minimum credit score 680
• Seller can pay up to 3% of the sale price toward your closing costs or pre-paids
• Minimum investment of YOUR money — $1000
• Must attend the Homestretch class

Let’s look at an example comparing FHA to this new program.

In the scenario above, you could actually increase your purchasing power by about $4000, which may not seem like a lot, but could get you up to a different price point.  This program has so many positives.  Let’s hope it can help you afford the home you’ve been wanting to buy!

I can’t believe how quickly the third Thursday of the month came!  Wow.  I’m ready to educate you on the home-buying process.

The FREE seminar starts at 6:30 and ends between 7:30 and 8pm.  This seminar has been presented many times and continues to be a successful avenue for first time buyers to get their feet wet on the process of buying  home.  Be prepared to learn what you need to do starting with the pre-approval from a lender to getting the keys at closing.  There are a lot of steps in-between but if you’re familiar with them, the process will be much smoother. 

Needless to say, the market is a little upside down.  Things have and are changing daily with regards to down payment, credit requirements, as well as documents needed to verify assets or income.  What hasn’t changed are the great opportunities to get into a home at a great value, pay as little as $750 out of your pocket AND take advantage of some great programs made especially for you.

I will be honored with the presence of my first time buyer partner, Steve Howe.  He will address the other “stuff” you need to know about making an offer, inspections and the process in general.

Our goal for the evening is to give you the information you need to feel comfortable about setting foot into the world of buying a home and eventually, home-ownership.  We want to educate and honestly hope you will gain a clear understanding of the process, as well as the great opportunities the market has to offer you right now.

Please RSVP to Cheryl by clicking here.  You can bring as many guests as you want and most importantly, come with questions!  See you tonight.

With rates falling, a few of the first time buyer programs have been lagging behind as they still have higher rates.  A regular FHA fixed rate is between 4.5% and 4.75%* today.  The Dakota County program’s rate was at 4.99%.  Many people are still taking advantage of the program since it offers down payment assistance.  Recently, they lowered the rate to 4.75% to be competitive with the market.  So you know, this is a rare thing for first time progams.  Normally when there is money alloted to the counties, the initiative is set at a certain amount of funds and a certain rate.  This is great news!

To repeat, many people are taking advantage of this program not just for the rate, but the opportunity to get down payment assistance.  The Dakota County program offers three tiers of assistance depending on household income.  Household income is defined as income brought in by all people in the home over age 18 and includes such income as bank interest, child support/alimony, side jobs, etc.  Even if the income can’t be used for qualifying (i.e. overtime that has been received for less than two years), it is still figured into the limits for first time buyer programs.  Here are the down-payment tiers:

Household          10%                         5%                      2.5%
Size                  Income Limit      Income Limit    Income Limit

1                           $29,400                $45,100              $84,000
2                           $33,600                $51,550              $84,000
3                           $37,800                $58,000             $92,400
4                           $42,000                $64,400             $92,400
5                           $45,400                $69,600             $92,400
6                           $48,750                $74,750            $92,400
7                          $52,100                 $79,900            $92,400
8                           $55,450                 $85,050           $92,400

Max assistance for the 10% limit is $10,000 and max for the 5% limit is $7500.

So what do the numbers mean? Let’s reference the middle column. Let’s say you have 3 people in your household. That means your total household income must be under $58,000 — one cent over and you go to the next column. In this scenario, you qualify for down payment assistance equal to 5% of the base loan amount, with a max of $7500. The first time buyer assistance is a second mortgage that is placed against your home when you close. It is an interest-free and payment-free loan. If you received $7500, you would pay back $7500 either when you refinance your loan or sell your home.

If you’re looking in Dakota County for your first home, definitely check out this program.  All lenders are not created equally with first time programs.  Lenders must be approved to do this financing.  Obviously, I can help!  It’s time to take advantage of all you have to gain as a first time buyer in this market!

*Rates are subject to change.

Is this house-hunting thing making you feel a little unraveled?  With all the homes on the market, people telling you to “buy now” and the overwhelming amounts of information about programs — who can blame you for not keeping it together!  Okay, so maybe do have this process all figured out.  I commend you for doing some homework and getting educated.

Let’s start with what you need to do BEFORE you start househunting — get pre-approved with a reputable and reliable lender.  A pre-approval means you’ve completed an application with a lender, had credit pulled, provided supporting documentation and your loan has been through an automated underwriting system and/or been seen by an underwriter.  If these things DON’T happen, you’re NOT pre-approved.  There are many things that the lender looks at when determining your qualifications. 

In order to determine the accuracy of your application, we must gather supporting documentation — hence, having you “pull it together”.  The list applies to anyone on the loan application and not all items on this list will pertain to everyone. 

-most recent TWO paystubs

-last TWO years W2s*

-last TWO years federal taxes, all schedules*

-most recent month bank statement, showing beginning and ending balance, all pages

-most recent quarterly statement for any accounts not monthly, i.e. retirement, stocks or bonds, all pages

-any court papers such as decrees or bankruptcy documentation

*If you intend on using a first time buyer program, you will need the last THREE years W2s and federal taxes.  This proves to us and the first time buyer powers-that-be  that you have not owned a home in the last 3 years which is the criteria to be considered a first time buyer.

I know what you’re thinking … along the way I may ask for more, including your first born, right?  People have stories and some are quite good.  My goal is to get everything I need upfront so there aren’t last minute dashes to find other paperwork.  Also, if other things enter your situation for buying, we need to address them with … more paperwork, i.e. a gift from family or document a large deposit into your account.  If you want to avoid some of the pitfalls that can cause havoc in your loan process, check out this great article written by my manager.  She makes a very boring thing, like what not to do while in the process, very funny.

Moral of this story — pull it together to support your application information.  If other documentation is requested, please provide that in a timely manner.  The sooner we have your paperwork, the better.  And before I forget, I am NOT perfect.  I make mistakes and sometimes miss things.  So forgive me if I ask for something you gave/emailed me.  I have so many conversations in a day and receive my share of emails.  I try to keep it all straight, but sometimes, it’s just better to ask again.  No double guessing.   The past few months have been fun as I am working with three ladies that all have the same first name!  Mama Mia!  So, forgive me now.  And most importantly, just know that you WILL be given the best service and communication around.

We just completed another successful first time buyer seminar this past Thursday night.  That was quite the night of storms — thought we might be talking to a small, non-existent audience, but we got lucky and people “weathered” the storm!  I hope you all did too and thanks to those of you who did make the trek!

Every month, on the third Thursday, we perform an exciting light show with music and dance — okay, not really.  But we do present an evening of information so you can learn what you need to know before you get out and look at homes.  Please join us from 6:30-8 pm at the Cornerstone Mortgage office located in Burnsville at 436 Gateway Blvd. 

Steve Howe from Re/Max, and I, will walk you through the homebuying process starting with the first step … pre-approval.  That’s the step of getting your financing set up so you know you can actually purchase a home if you find one.  This is CRUCIAL in today’s market since, as a loan officer, I am seeing changes constantly on what investors are requiring to get a loan.  Come learn what the new changes are and come find out about the special programs you may be eligible for to help you afford your new home.

Steve will explain the home purchasing process and what you can expect from a Realtor.  He makes this process simple and easy to understand; whereas I just confuse you!  Just kidding.  Making sure you’re still reading!  He specializes in in helping first time buyers which is important since your needs are vastly different than a current homeowner.

Anyway, we’d love to have you at the seminar, whether it’s in July or our future classes.  And speaking of classes — this is NOT the Homestretch class that is required to qualify for the first time buyer programs.  You can see this as the Cliff Notes, but with additional information on the special programs that Homestretch doesn’t delve into.

Please RSVP with Cheryl to let us know how many spaces to save.  Can’t wait to meet you!  Oh and one pre-requisite … come with questions!

Every third Thursday of the month we are happy to offer you a free seminar* to learn more about the First Time Homebuyer Process.  Join us on Thursday, the 17th, 6:30-7:30 pm at the Cornerstone Mortgage office located at 436 Gateway Blvd in Burnsville.

From the starting point of getting pre-approved and all that entails to going to closing and signing a bunch of papers to officially dub you a First Time Home OWNER!  We are here to educate, not sell you something.  Steve Howe, Realtor with the Minnesota Real Estate Team, and I will also talk about purchase agreements, the many down payment assistance programs and answer ANY questions you have. Ultimately, we hope you will leave the seminar with a greater understanding of buying a home.

If you’d like to attend, please call Cheryl (952-808-0042) or email her to get your name on the list.  Bring any questions you have so we can address those throughout the seminar or at the end.  We look forward to seeing you this week!

*This is NOT Homestretch.  Go to www.HOCMN.org to register for this 8-hour class.

With so many foreclosures in the marketplace, you are bound to purchase one.  Thing about foreclosures is the process can be a little trying.  There are a few reasons for this.  First, you’re dealing with a bank, so timeliness is not always a priority on their part.  You may not get a decision on your offer as quickly as you’d like.  Sometimes, banks will set a date purchase agreements are due requesting the “highest and best” offers.  This means they’re looking for multiple offers and in this instance, they may have originally priced the home lower than market to create this frenzy.  It is what it is and if it’s a home you want, you have to play by their rules.

Will this Close?

Another thing you can expect with a foreclosure is an “as-is” addendum.  This means that you are buying the house without a seller’s disclosure and in most instances, the bank won’t fix anything if there are any issues with your inspection or appraisal.  Oh, and speaking of inspections … just because it’s sold as-is does not mean you can’t get one or make your offer contingent on one.  It’s still highly recommended.  Let me give credit to some banks out there.  Some WILL do repairs which can be beneficial to you.  Also, just because it’s bank-owned doesn’t mean you can’t ask the bank to cover some or all of your costs.  A good Realtor will be able to advise you on this aspect of your purchase agreement.

The reason a bank completes an as-is addendum, is they have no knowledge of the home.  They’ve never lived there and I’d be shocked if anyone from the bank has even been to the house.  So, if there was previous water damage, storm damage or anything that may negatively affect the home, they won’t know about it.  Typically, there is no personal property offered in these deals.  For instance, if the kitchen still has the appliances, they cannot guarantee they will be in the home when it transfers to you.  If they happen to be there when you move in — woohoo — extra bonus!

When working with the banks on these foreclosures, you can expect, in most cases, that the bank will require you to close with a title company they have chosen.  The bank will run all their transactions through this title company for ease and for familiarity.  Typically, the bank will offer to pay your owner’s title policy.  So you know, the bank may require you to close with their chosen company, though by law, you technically CAN choose your own company.  I would highly recommend you get a solid recommendation from your agent or lender.  Many title companies will adjust their fees to compete with the bank’s company.  I deal with title companies all the time and I know who performs and who could use a little work.  Those that can use a little work are not all bad.  There may be delays in getting paperwork or closing scheduled, but it eventually gets done. 

Sometimes, it doesn’t.  Here’s what happened that should have never happened.  A recent transaction I had didn’t close on it’s desired close date and then didn’t close a week later.  It wasn’t the client’s fault.  It wasn’t due to financing — package and funds were there.  It wasn’t due to the Realtors not doing their job — they did all they could.  It ALL had to do with the title company.  This “title company” had no presence in MN.  The people were slow to answer emails and rarely answered phones.  They didn’t meet with clients, but sent a notary — very impersonal.  Not only that, the title work was “outsourced” which made matters worse.

Needless to say, we needed some paperwork, which took a few weeks to get after persistent emails and calls.  We needed the closing to be scheduled so we knew when to date the closing paperwork and the buyers knew when to be available — never was set.  Since we finally had the necessary paperwork, the agents and client set a date; we sent the package and wired funds.  It’s typical for the title company to provide a HUD to the lender for approval.  The HUD is the itemization of the settlement charges.  We spent the morning of the ”rescheduled” closing date burning the phones up to the closer, as well as emailing.  Nothing.  Right after lunch, we requested the wire be sent back since there was no response or HUD.  Low and behold … a response with a request to give them some time as they are working on the HUD.  That was it, the last communication.  I am not sure why an extra week wasn’t enough time.  Come Monday we still didn’t have the wire back. 

Seems pretty bad, huh?  It is unacceptable to have such poor communication.  In the 16 years I have originated loans, I have NEVER experienced such disregard to all the people involved.  If you think the above is bad … the following is worse.  The family moved from their apartment, had their lives in a truck, their kids hours away with family and no place to go expecting to close on the date set in the purchase agreement.   So, that week the buyers had to pay to store their stuff and live in a hotel, with many days of frustration and uncertainty.  Who wants to go through this?  They didn’t deserve this.  The day the funds were at the title company, we waited … and waited … and the return calls never happened nor did the HUD arrive.  The buyers moved on and are now renting month to month.  They had to, had to provide a home for their children and stop waiting for a closing that wasn’t happening.  Why?  Because a title company couldn’t get their ducks in a row, didn’t have the same customer-focus as the others involved and didn’t have the desire to make it happen.

How could this have been prevented?  Bucking the system with the bank and choosing their own title company.  Does this mean everything would have been rosy?  Not necessarily, but it would have meant familiarity by those who matter — the buyers, agents and mortgage company.  It would  have meant the personal touch of having a person to talk to, someone to depend on and someone to sit across from who knows the programs and can explain the paperwork — not just a notary to stamp after each signature — which is how they planned to handle the signing.  These people could have saved hundreds, not to mention all the time lost in work, on the phone and away from their children.  How do they get that back?  How can they be compensated for what they lost?  They can’t and that is a shame.

Working with the right people doesn’t just mean your Realtor and loan officer.  EVERYONE involved in the transaction needs to have the same goals in mind … YOUR goals in mind.  This obviously includes the title company.  As you can see, they can make or break a transaction — a preventable situation.  I am hopeful that this family can get their lives back in order and I truly hope they can trust again to take that magical step of owning their first home.  They actually gave the title company one more shot and … of course, they still didn’t close.   I pray homeownership happens, as everyone deserves to own a home and more importantly, everyone deserves to be treated fairly, like they matter and be given the common courtesy of great communication.

Huh? What dispute? The one I am having with my roommate or with my parents about buying a home? You may have many disputes going on in your life. The one I am referring to is a dispute you started yesterday or 10 years ago with a creditor.

If you’ve been one to check your credit or maybe have had some issues in the past, you may have seen erroneous “tradelines” on your credit report.  A tradeline is an item of credit — car loan, credit card, mortgage, student loan,etc.  Now, if I were you I would be all over that like a bee to honey.  I’d contact the creditor and “dispute” the inaccurate information.  Wouldn’t you?  The whole goal is to get the right things reporting on your report, not items that don’t reflect your score and ability to pay on time.  True.  BUT one little catch.  Though you’re trying to BETTER your credit situation, you are actually making it harder to get financing.

Seriously?  Helping your credit/disputing an account = tough time getting a loan.  Tough to follow that logic,huh?  FHA is the most popular loan right now and the most lenient when it comes to credit scoring, as well as only requiring 3.5% down.  However, they have this little guideline that has been creating BIG issues for folks getting home loans.  The deal is, if you have disputed an account on your report, regardless of what the dispute consists of, your loan guidelines just got stricter.  Yes, your loan qualifications got tighter because you were trying to help your score improve.  Does that make sense?  Nope, not to me, but lately, many of the “rules” and changes have caused me to scratch my head quite often.

So, what changes with your underwriting guidelines?  For one, your loan must be manually underwritten.  90% of my loans are run through and approved through AUS (automated underwriting system).  Information about you in … decision on a loan for you out.  Slick and easy.  Your file is still processed, verified and still gets in front of an underwriter for the final stamp of approval.  In a manual underwrite, it doesn’t matter what the loan decision is through the AUS.  It’s no longer eligible for this to move to the underwriter faster and with more assurances of getting  your final approval.  It now has to be reviewed in depth and documented in depth in order for an underwriter to make a decision.

The rules to follow:

• Your ratios cannot exceed 31/43%.  This means you cannot spend over 31% of your GROSS monthly income toward your house payment, OR over 43% of your gross monthly income toward your house payment and other monthly debts.  This is concrete; no wiggle room here.  We will use the lesser payment for qualifying when choosing the payment you can be approved for.
• We must get traditional VOE’s and VOD’s (verification of employment and deposits)  So, even though you provided me with W2′s and paystubs, as well as bank statements, we must still get this information from a 3rd party.  No fun especially since some banks and some employers charge a fee to give us that information.  Unbelievable.
• We must do a VOR which is a verification of rent.  Important that we confirm you make rent payments on time.  Don’t worry if you’re not renting and with family; this won’t hurt your chances of getting a loan.
• The biggest one — you must have 2 months of reserves.  In layman’s terms, that means after closing, you need 2 months of your PITI payment leftover.  This can include retirement.  Here’s the thing.  Most first time buyers have a hard enough time coming up with their down payment or minimum investment depending on the first time program the buyer uses.  Now you’re saying we need money left over?  Yup and it hurts.

So how do you combat this?  Well, there may be a way to work on getting the dispute removed.  For instance, you could contact the creditor and tell them you don’t want to dispute the account any longer.  About 30 days after you call, we can re-pull credit to make sure the verbiage “account in dispute” has been removed.  It’s not an ideal situation, BUT, it would allow for a faster decision, more leniency on what you qualify for and NO requirement to have money leftover after you close, though there is nothing wrong with that!

The moral of this story — don’t wait to find a house to make an offer to find out you might have to wait due to this rule.  Make sure you’re getting pre-approved with a lender that knows these guidelines and looks for them when reviewing your report.  Also, there are people I can refer you to with regard to credit restoration if you’re in that boat.  Let me help you get ready for the biggest purchase of your life.  Knowledge is power and the more you know and can prepare for now will save a lot of headaches and stress when you do buy.  I think you’ll have enough of that just from doing something new!

You may have heard that it’s getting harder and harder to qualify for a loan.  It’s true.  Though things have lightened up a bit, some old rules have come back into play, as well as new rules are being enforced more than ever.  For the most part, I am referring to FHA financing below as they are the most lenient when it comes to qualifying for a home.  More than 95% of my clients use this loan type due to this, the lower down payment requirement and the ability to receive a gift.

These days, what do you need to know with regards to credit requirements?

• Your credit score must be 620 or higher.  The line is drawn in the sand on this one — higher requirements for conventional financing.
• You must have THREE tradelines* with at least 12 months history.**
• If you have ANY disputed accounts, we MUST manually underwriter your file, per FHA.***
• Judgments and liens must be paid in full prior to or at closing.
• With FHA, collections do NOT have to be paid off.
• With FHA, student loan payments DON’T have to be counted in the ratios for qualifying IF they are deferred and we can get proof they won’t start until at least 12 months after your first payment is due.

For the most part, these are the main things to know about credit these days.  So you know, first time buyer programs aren’t programs that allow anybody, such as people with bad credit, get a loan.  You first have to qualify for a mainstream loan, like FHA, VA or Conventional.  Once you’ve passed their muster, then we look to see what first time programs meet your situation in terms of income, household size and location.

And some tips for dealing with your credit?  If you want to buy a home, you need to watch a few things:

• Make your payments on time — period.
• Bring your credit card balances down to 50% or less of the available credit.
• Don’t apply for new credit or have your credit pulled.
• Don’t consolidate credit cards.
• Definitely don’t close accounts, whether you use them or not.
• Don’t pay off collection accounts unless your loan officer advises you to (if you pay off an old account, it could negatively affect your score)

Certainly, if you have any questions, don’t hesitate to contact me.  It’s best to talk about what you want to do with your credit PRIOR to doing it.  Easier to “fix” a potential problem before it happens.  Once it’s done, it’s done.

*Tradeline is an item of credit on your credit report.  It can be a credit card, house payment, car payment, student loan or another type of installment debt.  Collections and derogatory credit don’t qualify as a tradeline.

**Some first time buyer programs defer to FHA standard rules and don’t require the 3 tradeline minimum or 12 month history.  Check with a first time buyer expert (like myself ) to see what you can do if you don’t meet these parameters.

***Most loans are run through an automated system to get an answer and all still get seen by an underwriter for final approval.  However, if there is a disputed account, the automated system isn’t acceptable and an underwriter MUST look at the file and stick to standard FHA guidelines.