Monthly Archives: December 2016

8 Steps to Take Before Getting a New Mortgage in Minnesota

Getting a Mortgage

As a Minnesota consumer, it’s important to enter the mortgage selection process with a firm grasp on which financial arrangement will work best for your household. The following steps are an excerpt from the Consumer Financial Protection Bureau’s Home Loan Toolkit; a clearly written and invaluable guide for home loan shoppers. The complete toolkit, including financial worksheets and valuable tips, is available as a download (in PDF).


Step 1 – Define What Affordable Means To You

“Only you can decide how much you are comfortable paying for your housing each month. In most cases, your lender can consider only if you are able to repay your mortgage, not whether you will be comfortable repaying your loan. Based on your whole financial picture, think about whether you want to take on the mortgage payment plus the other costs of homeownership such as appliances, repairs, and maintenance.”

Use these worksheets (in PDF) to estimate your ideal mortgage payment.

Step 2. Understand Your Credit

“Your credit, your credit scores, and how wisely you shop for a loan that best fits your needs have a significant impact on your mortgage interest rate and the fees you pay. To improve your credit and your chances of getting a better mortgage,get current on your payments and stay current. About 35% of your credit scores are based on whether or not you pay your bills on time. About 30% of your credit scores are based on how much debt you owe. That’s why you may want to consider paying down some of your debts.”

Instructions on how to obtain your credit report and correct errors is available here (in PDF). 

Step 3. Pick Your Mortgage Type – Fixed or Adjustable

“With a fixed-rate mortgage, your principal and interest payment stays the same for as long as you have your loan. Consider a fixed-rate mortgage if you want a predictable payment. You may be able to refinance later if interest rates fall or your credit or financial situation improves.

“With an adjustable-rate mortgage (ARM), your payment often starts out lower than with a fixed-rate loan, but your rate and payment could increase quickly. It is important to understand the trade-offs if you decide on an ARM. With an ARM your payment could increase a lot, often by hundreds of dollars a month. It’s important to make sure you are confident you know what your maximum payment could be and that you can afford it.”

Step 4. Choose The Right Down Payment

“A down payment is the amount you pay toward the home yourself. You put a percentage of the home’s value down and borrow the rest through your mortgage loan.”

Learn more about how your down payment will affect your total loan package using this easy to follow chart (in PDF). 

Step 5. Understand The Trade-Off Between Points And Interest Rate

“Points are a percentage of a loan amount. For example, when a loan officer talks about one point on a $100,000 loan, the loan officer is talking about one percent of the loan, which equals $1,000. Lenders offer different interest rates on loans with different points.

“There are three main choices you can make about points.

  1. You can decide you don’t want to pay or receive points at all. This is called a zero point loan.
  2. You can pay points at closing to receive a lower interest rate.
  3. Or you can choose to have points paid to you (also called lender credits) and use them to cover some of your closing costs.”

See an example (in PDF) that demonstrates the trade-off between points as part of your closing costs vs. interest rates.

Step 6. Shop With Several Lenders

“You’ve figured out what affordable means for you. You’ve reviewed your credit and the kind of mortgage and down payment that best fits your situation. Now is the time to start shopping seriously for a loan. The work you do here could save you thousands of dollars over the life of your mortgage.

  1. Make a list of several lenders you will start with. Mortgages are typically offered by community banks, credit unions, mortgage brokers, online lenders, and large banks.
  2. Get the facts from the lenders on your list. Find out from the lenders what loan options they recommend for you, and the costs and benefits for each. For example, you might find a discount is offered for borrowers who have completed a homebuyer education program.
  3. Get at least three offers—in writing—so that you can compare them. Ask at least three different lenders to give you a Loan Estimate, which is a standard form showing important facts about the loan.
  4. Compare Total Loan Costs. Total Loan Costs include what your lender charges to make the loan, as well as costs for services such as appraisal and title.”

Use this chart (in PDF) to easily compare your mortgage offers.

Step 7. Choose Your Mortgage

“Once you have found your best mortgage, the next step is to tell the loan officer you want to proceed with that mortgage application. This is called expressing your intent to proceed. Lenders have to wait until you express your intent to proceed before they require you to pay an application fee, appraisal fee, or most other fees.”

Step 8. Avoid Pitfalls And Handle Problems

“Even the best prepared consumer can run into problems during their loan process. It’s important to be aware of how to smoothly navigate any potential setbacks.”

Learn more about how to deal with mortgage issues like lending discrimination, predatory lending and more with this easy flow chart (in PDF).

The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.  Have a question about a common consumer financial product or problem? You can find answers by visiting consumerfinance.gov/askcfpb.

4 Important Conversations to Have When Buying a Home in Minnesota

Buying a Home

Buying a home in Minnesota is a big investment and you should feel at ease asking questions, and discussing the process with your loved ones and your lender. The following conversation starters were taken from the Consumer Financial Protection Bureau’s Home Loan Toolkit. They are meant to help prompt important conversations you may need to have during the home buying process.

The complete toolkit, including financial worksheets and valuable tips, is available as a download (in PDF).


1. Before Buying: Deciding What You Can Afford

Ask your spouse, a loved one, or friend about what affordable means to you:

  • “What’s more important—a bigger home with a larger mortgage or more financial flexibility?”
  • “How much do we want to budget for all the monthly housing costs, including repairs, furniture, and new appliances?”
  • “What will a mortgage payment mean for other financial goals?”

2. During Mortgage Shopping: Talking With Potential Lenders

Talking to different lenders helps you to know what options are available and to feel more in control. Here is one way to start the conversation:

  • “This mortgage is a big decision and I want to get it right. Another lender is offering me a different loan that may cost less. Let’s talk about what the differences are and whether you may be able to offer me the best deal.”

3. When Comparing Offers: Discussing Terms With Potential Lenders

Rate lock policies vary by lender. Choosing to lock or float your rate can make an important difference in your monthly payment. To avoid surprises, ask:

  • “What does it mean if I lock my rate today?”
  • “What rate lock time frame does this Loan Estimate provide?”
  • “Is a shorter or longer rate lock available, and at what cost?”
  • “What if my closing is delayed and the rate lock expires?”
  • “If I lock my rate, are there any conditions under which my rate could still change?”

4. While Preparing To Close: Discussing Changes To Your Loan With Your Lenders

If your Loan Estimate is revised you should look it over to see what changed. Ask your lender:

  • “Can you explain why I received a new Loan Estimate?”
  • “How is my loan transaction different from what I was originally expecting?”
  • “How does this change my loan amount, interest rate, monthly payment, cash to close, and other loan features?”

The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.  Have a question about a common consumer financial product or problem? You can find answers by visiting consumerfinance.gov/askcfpb.

4 Important Conversations To Have When Buying A Home

Buying a Home

Buying a home is a big investment and you should feel at ease asking questions, and discussing the process with your loved ones and your lender. The following conversation starters were taken from the Consumer Financial Protection Bureau’s Home Loan Toolkit. They are meant to help prompt important conversations you may need to have during the home buying process.

The complete toolkit, including financial worksheets and valuable tips, is available as a download (in PDF).

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1. Before Buying: Deciding What You Can Afford

Ask your spouse, a loved one, or friend about what affordable means to you:

  • “What’s more important—a bigger home with a larger mortgage or more financial flexibility?”
  • “How much do we want to budget for all the monthly housing costs, including repairs, furniture, and new appliances?”
  • “What will a mortgage payment mean for other financial goals?”

2. During Mortgage Shopping: Talking With Potential Lenders

Talking to different lenders helps you to know what options are available and to feel more in control. Here is one way to start the conversation:

  • “This mortgage is a big decision and I want to get it right. Another lender is offering me a different loan that may cost less. Let’s talk about what the differences are and whether you may be able to offer me the best deal.”

3. When Comparing Offers: Discussing Terms With Potential Lenders

Rate lock policies vary by lender. Choosing to lock or float your rate can make an important difference in your monthly payment. To avoid surprises, ask:

  • “What does it mean if I lock my rate today?”
  • “What rate lock time frame does this Loan Estimate provide?”
  • “Is a shorter or longer rate lock available, and at what cost?”
  • “What if my closing is delayed and the rate lock expires?”
  • “If I lock my rate, are there any conditions under which my rate could still change?”

4. While Preparing To Close: Discussing Changes To Your Loan With Your Lenders

If your Loan Estimate is revised you should look it over to see what changed. Ask your lender:

  • “Can you explain why I received a new Loan Estimate?”
  • “How is my loan transaction different from what I was originally expecting?”
  • “How does this change my loan amount, interest rate, monthly payment, cash to close, and other loan features?”

The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.  Have a question about a common consumer financial product or problem? You can find answers by visiting consumerfinance.gov/askcfpb.

4 Steps to Help You Protect Your Home Investment in Minnesota

Protect Your Investment

Congratulations Minnesota homeowner! You’ve closed on your mortgage and are now the proud owner or owners of a new home. Whether you plan on staying in your new place for five years or fifty, it’s important to make sure you are protecting the investment you’ve worked hard to acquire.

The following excerpt from the Consumer Financial Protection Bureau’s Home Loan Toolkit can help you take some key steps towards securing your status as a homeowner. The complete toolkit, including financial worksheets and valuable tips, can be found at ? The complete toolkit, including financial worksheets and valuable tips, is available as a download (in PDF).


Step 1 – Act Fast If You Fall Behind On Payments

Life happens and unexpected expenses can throw your budget off track. Here’s what to do in order to protect your home if you fall behind on your mortgage.

Talk To Your Mortgage Servicer.

The company that accepts payments on your mortgage, known as your mortgage servicer, is likely to  contact you when you fall behind. Your servicer does so not only to remind you to bring your payments current but because they are required to let you know what options are available to avoid foreclosure.

Don’t ignore your mortgage servicer’s calls because you feel overwhelmed. Talk to your mortgage servicer, and find out your repayment options.

Contact A Housing Counselor For Guidance.

HUD-approved counselors are professionals who can help you, often at little or no charge to you. The U.S. Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country to provide free or low-cost advice.

o find a HUD-approved housing counselor visit consumerfinance.gov/find-a-housing-counselor or call HUD’s interactive voice system at (800) 569-4287.

Don’t Fall Prey To Repayment Scams

Homeowners struggling to pay a mortgage should beware of scammers promising to lower mortgage payments. Only your mortgage servicer can evaluate you for a loan modification. If you suspect a scam you can call (855) 411-2372 or visit consumerfinance.gov/complaint.

Step 2 – Keep Up With Ongoing Costs Too

Your mortgage payment is just one part of what it costs to live in your new home. Your escrow account typically holds your monthly taxes and homeowner’s insurance payments. However, if your loan arrangement did not include an escrow account, you need to keep up with these costs

on your own. Be sure that when those tax and homeowner’s  insurance bills land in your mailbox you have the funds set aside in a savings account to cover them.

It’s Murphy’s Law that when one thing in your home needs repair, another is sure to shortly follow. Make sure that you have funds set aside for maintenance and repairs as well so they don’t derail your budget.

Step 3 – Determine If You Need Flood Insurance

Flooding causes more than $8 billion in damages in the United States in an average year.

Depending on your property location, your home is considered either at high-risk or at moderate-to-low risk for a flood. Typically, your insurance agent should have that information for you. However, you can also go to FEMA’s Flood Map Service Center to look up your address. Your insurance premium will vary based on how close you are to floodplains. To learn more about flood insurance visit FloodSmart.gov. Private flood insurance could also be available to you.

Although you may not be required to maintain flood insurance on all structures, you may still wish to do so, and your mortgage lender may still require you to do so to protect the collateral securing the mortgage. If you choose to not maintain flood insurance on a structure, and it floods, you are  responsible for all flood losses relating to that structure.

It’s important to be aware that most flood insurance will not cover basement damage due to sewer backups that have occurred from heavy rains. Most home insurers will also offer Sewer Backup Insurance as well. If you are planning on storing valuables in your basement or enjoying a finished basement this is an additional coverage you may want to consider.

Step 4 – Understanding Home Equity Lines of Credit (HELOCS) and Refinancing

Homeowners sometimes decide they want to borrow against the value of their home to help remodel or pay for other large expenses. One way to do this is with a Home Equity Line of Credit (HELOC). You can learn more about HELOCs at files.consumerfinance.gov/f/201401_cfpb_booklet_heloc.pdf.

Financial counselors caution homeowners against using a HELOC to wipe out credit card debt. If you use a HELOC as a quick fix to a serious spending problem, you could end up back in debt and lose your home.

If you do decide to take out a HELOC or refinance your mortgage, the Truth in Lending Act (TILA) gives you the right to rescind, meaning you can change your mind and cancel the loan. But you can only rescind a refinance or HELOC within three days of receiving a proper notice of the right to rescind from your lender. It is important to note that you cannot rescind if you are using your HELOC to buy another home.

In the case of a refinance, consider how long it will take for the monthly savings to pay for the cost of the refinance. Review the closing costs you paid for your original loan to purchase the home. Refinancing costs can be about the same amount. A common rule of thumb is to proceed only if the new interest rate saves you that amount over about two years (in other words, if you break even in about two years).

The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.  Have a question about a common consumer financial product or problem? You can find answers by visiting consumerfinance.gov/askcfpb.

Existing-Home Sales Forge Ahead in November

Fast Fact: At an annual rate of 5.61 million in November, existing-homes sales are now the highest since February 2007 (5.79 million) and are 15.4 percent higher than a year ago (4.86 million).

A big surge in the Northeast and a smaller gain in the South have pushed existing-home sales up in November for the third consecutive month. Nationwide, total existing-home sales rose 0.7 percent.

Existing Home Sales November 2016

Lawrence Yun, NAR chief economist, says it’s been an outstanding three-month stretch for the housing market as 2016 nears the finish line.

“The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months,” Yun said. “Furthermore, it’s no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month.”

Total housing inventory at the end of November dropped to 1.85 million existing homes available for sale, and is now 9.3 percent lower than a year ago (2.04 million).

“Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017,” added Yun. “Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.”

The median existing-home price for all housing types in November was $234,900, up 6.8 percent from last November ($220,000). November’s price increase marks the 57th consecutive month of year-over-year gains.

Tips to Help You Find a Home in a Low-Inventory Market

Follow the inventory: Inventory varies by location, property type and price range. You will have more to choose from, and probably get more bang for your buck if you search for a house in an area with more availability.

Look for homes investors avoid: Investors tend to steer clear of homes that cannot be flipped or rented, such as those in gated communities. Some of these communities let investors get away with flipping and renting when the market was hurting, but with the housing market recovery, homeowner associations are cracking down on investor activity.

Don’t forget “expired” and “canceled” listings: Many people try to sell their house by listing it on an MLS—but fail to complete a sale. Those listings become “expired” or “canceled.” Have a REALTOR® assist you in finding a home that is not currently on the market.

Seasonal patterns can favor buyers: Remember there are clear seasonal patterns for housing inventory. Identifying these patterns with a REALTOR® in your area can open up more opportunity for a great home purchase.

Finding Solutions For The Homeless in America

Homeless

Even the best public speakers sometimes have an off day.

That’s how Sherri Meadows felt one day back in 2007 after speaking to a room full of REALTORS® in Tampa.

As the president of the state chapter of the Women’s Council of REALTORS®, Meadows was travelling around the state offering an inspirational speech with a theme of “Imagine, Believe and Achieve.”

And while she had given this speech many times, trying to inspire her colleagues to go out and do the things necessary to not only better themselves, but to better their communities, Meadows felt there was something missing at this event.

“I just didn’t feel like I had connected with that audience,” she said. “Something didn’t feel right.”

But something was right. More right than she could have ever imagined. So much so that it led her on a path to a whole new message. One that now, nearly a decade later, is a triumphant success story for REALTORS® nationwide.

THE WAITER

There he was in the back of the room, listening intently as Meadows spoke. A man employed by the venue to help serve the patrons and then clean up after the event was over. Meadows noticed him from the dais. She could tell he was listening to what she had to say.

As the event died down and mostly everyone left, the waiter stopped busing a table for a moment to approach Meadows.

“I want you to know that your speech today had a real impact on me and it has given me hope,” he said to her.

That made Meadows feel good. She was glad her message got through to someone, even if it wasn’t one of the realtors in attendance.

But it was what he said next that really blew her away.

“I’m homeless,” he said. “I live in a shelter. When I get home from work, I find that others have rummaged through my things. They ridicule me because I’m working and trying to be somebody. They tell me I’ll never amount to anything. But after hearing you speak today, I promise you that the next time you see me, I will be somebody.”

It hit Meadows like a ton of bricks.

She never forgot the conversation. A few years later, once she became president of the Florida REALTORS®, she had the opportunity to select a charity that the state would raise money to support.

Thinking of that waiter, Meadows decided instead of raising money, she wanted to raise awareness. It was a pretty good idea coming off a multi-year recession.


Doing some research, she found that there were 63,000 school-age children in Florida who were classified as homeless.


Doing some research, she found that there were 63,000 school-age children in Florida who were classified as homeless. Nobody in the schools knew they were homeless, but it had become epidemic with so many houses having been foreclosed, families were forced to live in hotels, or mobile homes, or with other friends or families.

“We knew there were veterans who were homeless and the mentally ill who were homeless but this was a completely different group of people. It was entire families that we needed to focus on.”
The outreach lasted several months and was successful in Florida.

Meanwhile NAR was ramping up a similar campaign, and Meadows and her team helped enrich the platform.

Continue Reading: REALTORS® from across the country come together…

 

 

 

UPDATE: REALTORS and Homeowners Work Together To Abolish Unfair Property Taxes in Honolulu

Honolulu
The city of Honolulu is home to nearly 375,000 residents. The city is a major vacation destination and helps contribute to the more than $15 billion in tourism revenue that comes into Hawaii each year.

Back in 2013 the way Oʻahu taxed property owners was significantly changed by the City and County of Honolulu. A new classification, Residential A, was put in place that required property owners to pay $6 for every $1,000 of their home’s appraised value vs. the former charge of $3.50 per every $1,000.

Residential A homes are ones that are valued at upwards of a million dollars, and are not occupied year round. This tax change meant that people who owned second homes, or investment properties would be paying almost twice as much as the average homeowner.

The reclassification caused rental fees to go up as owners tried to make up for the increase in taxes, a move that not only hurt rental property owners but had the potential to strike a blow to the island’s overall tourism appeal.

Most recently, Tax Appeal Court Judge Gary W.B. Chang overturned the property tax change, deeming it illegal and unconstitutional. This ruling means that close to 8,700 homeowners will no longer have to pay the inflated “Residential A” property tax as questions are also being asked about assessments from this past February’s property tax payments.

Hawaii REALTORS® are monitoring this as it makes its way through the processes.