Lock In A Low Loan Rate

When it comes to mortgage loans and interest rates, it is never a good idea to gamble. The best way to ensure a good rate on your mortgage is to lock in a good rate as soon as possible. Locking in a rate has no negative repercussions for you. It only protects you from market volatility.

A mortgage loan cannot be closed without a locked-in rate, and there are three main elements to take into consideration:

  • Interest rate
  • Points or fees
  • Length of the lock

Locking in a rate does not obligate you to commit to the loan until the loan is actually closed. The lock is merely a security measure designed to eliminate the risk of market volatility throughout the duration of the purchase or refinance transaction. Our standard procedure is to lock in a rate as quickly as possible.

Lake Area Mortgage and I are deeply committed to guaranteeing the best rates for each of our clients. I am proud to see my clients achieving their home ownership dreams, and I would love to help you find your ideal home. With the right financial advice, you can achieve your dreams.

Carefully Review Homeowner’s Insurance Policies

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A homeowner’s insurance policy is usually required when you obtain your home loan. However, it can be difficult to find an affordable insurance policy that covers all of your essential property. It is important that you thoroughly review insurance companies before making your decision.

One of the most important items to review before purchasing an insurance policy is the A.M. Best Rating of the company. The A.M. Best Financial Strength Rating evaluates a company’s ability to fulfill its insurance obligations based on its balance sheet strength, operating performance and business profile. Companies can receive anything from an F to an A++, but any score under a B+ is considered financially vulnerable and is generally not a good choice to insure your home.

You should also become familiar with the liability portion of the policies you are considering. Actual Cash Value (ACV) policies pay claims based upon the depreciated value of the item or items lost, leaving you partially liable. Replacement cost policies will pay the full cost required to replace the items.

Once you have chosen an insurance policy, you should continue to have your home appraised every five years. If additions are made or remodeling takes place, you will need to review and possibly upgrade your plan as well.

Be careful to avoid common mistakes. The first is having inaccuracies on your application. This is grounds for rejecting any claim which would leave you completely liable for all costs. Secondly, make sure your policy includes any detached structure such as a guest house, a barn, a workshop, or a garage. Finally, do not over-insure. You can save some money by insuring only those items and structures that need to be replaced.

Tips for Home Sellers

Tips for Home Sellers

When selling your home, one of the most powerful bargaining tools you have is the home’s appearance and appeal. A potential buyer’s first impression of your home may be the strongest one she will have, and it can be very difficult to change. A mediocre first impression will make it difficult to sell the property at anything beyond a mediocre price. On the other hand, a fantastic first impression will virtually guarantee you a better chance of closing your deal at a fantastic price.

Prepare your home for the market by viewing it through the eyes of a prospective buyer. Physically leave your home for a few minutes and come back with your eyes wide open. Take your time and write down absolutely everything you notice, from the smoothness of the grass to the brightness of the paint. Ask yourself, “What can I do to make my home irresistible?” Here are some of our top tips for home sellers:

Exterior of Home

  • Pull weeds from flower beds
  • Trim hedges into crisp, sharp lines
  • Remove unnecessary toys and other debris
  • Freshen exterior paint

Interior of Home

  • Remove clutter and unnecessary personal items
  • Remove furniture to thoroughly clean each room
  • Clean the carpeting
  • Rearrange furniture to maximize space and avoid blocking the view of the room
  • Open draperies that receive sunlight

There is a lot you can do to improve the appearance of your home without spending much money. Remember that cleanliness and smooth lines can increase the apparent value of your home exponentially.

Lake Area Mortgage & I Are Watching Rates For You

 

Watching Rates for You

Mortgage interest rates change daily, so we do our absolute best to ensure that you close your loan at the lowest rate possible. Even one-quarter of a percentage point can save you thousands of dollars over the life of your loan. We work hard to gain that quarter point, and are able to achieve our lowest rates based on the timing of economic downswings.

At Lake Area Mortgage, we keep a critical eye on current rates and continually compare them to the close rates of our clients’ loans. If rates drop enough that you can save money by refinancing your loan, we make you aware of it. We will send you our recommendation for how you can re-work your loan to save you the most money. This is a service we provide each day free of charge to all our clients. Once we have your loan information in our system, I’ll monitor it each day to optimize your mortgage.

The Importance Of Pre-Approval

Importance of Qualification Mortgage

Pre-qualification and pre-approval are two of the most important steps you can take towards owning a new home. Obtaining both pre-qualification and pre-approval allows you to begin searching for a new home with your potential loan established and accepted in advance.

Pre-Qualification

Pre-qualification is the first step to securing financing. During this process, we will determine the best loan options for your financial situation. Pre-qualification is quick and involves answering only a few questions about your income, existing debt and accumulated savings. It is also important that we discuss your long-term financial objectives. With so many loan options available, we want to select the one that meets your goals. With this information and your consent, I can access your credit report and begin to determine which loans are the best candidates for your current financial situation and long-term objectives.

Pre-Approval

Pre-approval occurs immediately after we determine which loan program would fit you best. This is written documentation showing that a lender will fully support and endorse you for a loan amount established by the underwriter. To set that limit, we submit a form 1003 Uniform Residential Loan Application containing the information you supplied during the pre-qualification process.

With a pre-approval in hand, you can shop as a cash buyer! This gives you strong negotiating power because the seller will take your offer more seriously. A lender’s pre-approval will often convince the sellers to accept a lower offer for the home because they know the financing is in place and the deal is safe.

Why Choose Lake Area Mortgage?

Lake Area Mortgage

Purchasing a home is an exciting adventure. However, it can also be an overwhelming experience. Lake Area Mortgage and I understand this and would like to help you make the home buying process as enjoyable and easy as possible. A big step in home ownership is choosing a mortgage company that’s right for you.

Every mortgage company is different and has different core values. At Lake Area Mortgage, we focus on four primary areas:

Choice

We offer a full range of loan programs including fixed rate loans, adjustable rate loans, interest only options and more. We’ll help you choose the one that’s best for you.

Education

We make sure you fully understand the advantages and disadvantages of each loan option you consider. We will help you understand exactly how the loan process works from start to finish.

Communication

We will keep you updated every step of the way in the loan cycle. If we see an opportunity to save you money, we will contact you immediately. If an issue arises, we will discuss the situation and the steps we are taking to resolve it.

Customer Satisfaction

We rely on our existing customers to refer their family, friends, neighbors and colleagues. Your satisfaction and well-being are our top priority. As any past customer of Lake Area Mortgage can tell you, we won’t stop working until you are satisfied. We hope you choose Lake Area Mortgage.

Credit Score Requirements for FHA Loans

Credit Score Requirements for FHA Loans

Photo: Flickr Creative Commons/Tsahi Levent-Levi

 

The mortgage credit market continues to ease. Effective for new FHA mortgage loan applications made on or after January 23, 2015, the minimum credit score for many FHA loans will be reduced, and 3 to 4-unit properties will be eligible cash-out refinance transactions. Until this change you were not able to refinance and take cash out of a 3 or 4 unit property. A 3 or 4 unit property would be a tri plex or 4 plex. The new credit score requirements and corresponding information will be outlined below. Anyone who has been turned down can now reapply under these new FHA mortgage and credit score guidelines.

For a FHA Purchase mortgage transactions & cash out refinances of 1 to 2-Units/Condo/PUD/203K. The minimum credit score will need to be 600. This is down from 620 and even 640 in a not too distant past!

For FHA purchase transactions of 3 to 4-Units (excludes 203k) your minimum credit score will need to be 620. This assumes that you will live and owner occupied one of the units.

On a rate and term Refinance, (no cash back allowed) the guideline is the same as a purchase mortgage. It assumes a 1 to 2-Unit/Condo/PUD/203k and the minimum credit score needs to be 600.

The Rate and Term Refinance for 3 to 4-Units (excludes 203k) Also follows the same guideline as a purchase transaction and will require a 620 credit score.

This is all good news for many buyers who continue to dig out from tough financial times of the past five years. It also continues the pendulum swinging back towards making it a bit easier to qualify and buy a new home. Certainly all lenders will still have other qualification factors that go into approving a mortgage loan. A credit score is just a part of the qualifying process and having a certain credit will not guarantee a mortgage approval. These changes have been summarized below.

Minimum FHA Credit Scores

Loan Purpose Minimum Credit Score
Purchase – 1 to 2-Units/Condo/PUD/203k 600
Purchase – 3 to 4-Units (excludes 203k) 620
Rate and Term Refinance – 1 to 2-Units/Condo/PUD/203k 600
Rate and Term Refinance – 3 to 4-Units (excludes 203k) 620
Cash-Out Refinance – SFR/Condo/PUD 600
Cash-Out Refinance – 2-Units 620
Cash-Out Refinance – 3 to 4-Units 660
Streamline Refinance – 1 to 2-Units/Condo/PUD 2, 3 580
Streamline Refinance – 3 to 4-Units 620

2. No prior foreclosures for loans having credit scores < 600
3. Credit qualification required when credit score is 580-599

MN Closing Costs You Need to Know About

MN Closing Costs You Need to Know About

Image Credit: Lendingmemo.com.

 

There are a lot of terms you will encounter the first time you begin looking to buy a home. Some of them you may have heard and others will be completely foreign. In fact, many of these terms will be on your Good Faith Estimate or other closing cost breakdown a lender may provide. We will attempt to explain the mortgage company’s fees, vs. the title company, government, and other third party companies involved in the Minnesota mortgage loan origination process.

On January 1, 2010 – the Good Faith Estimate Changed. Listed loan origination and other fees are different than in the past. The current Good Faith Estimate now bundles all mortgage company fees into what is still called origination. All lender fees, origination charge, processing fee, administrative fee, commitment fee, etc. are bundled together on the GFE and called loan origination. It has made it more difficult for lenders to hide all of their “junk” fees into a loan. The following are typical fees you can see a mortgage lender charge.

800 Items – Items Payable in Connection with Mortgage Loan

Lender’s Loan Origination Fee – A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the mortgage loan amount. In the past, many lenders charged 1% of the loan amount. Make certain you compare a loan without an origination fee. You will pay a bit higher mortgage rate, but in many cases it takes way too long to justify the large upfront money needed to pay for a mortgage loan origination fee. A mortgage loan origination fee is not “Discount Points” (these will also be referenced again under mortgage “JUNK” fees). All mortgage lender fees should be combined as much as possible. If you see processing, broker, origination, administrative, etc., you need to get a Good Faith Estimate, which required all lender fees to be combined.

Lender’s Loan Discount Fee (Points) – Also known as “Points”. A onetime only fee charged by the lender to lower the interest rate normally charged. Each point is equal to 1% of the mortgage amount. Paying points to lower your interest rate may or may not be a good idea. Just like a mortgage loan origination fee, it usually takes way too long to justify the upfront cost of “buying the rate down” or paying for points. But it makes sense to compare a mortgage loan with and without points.

Appraisal Fee – An appraisal is always needed to determine the security of the loan and the borrower’s Loan to Value (LTV). Many lenders charge this at the time of mortgage loan application. It can also be paid for when your mortgage loan closes. The appraiser will research and assess the market value of the property on which a mortgage is being placed. Average cost for a mortgage appraisal is $400, but the cost can be more for a duplex, triplex, larger homes, etc.

Credit Report – This fee is charged to pay a credit service agency to provide the lender with a full report detailing a borrower’s credit history. There are outside or third party companies involved with the mortgage loan origination process. Mortgage lenders “pull” or obtain an independent credit report from one of these agencies. It varies from program to program what is an acceptable credit score. Generally speaking, a good score is anything above 640. But some programs can require a higher score. Credit scores can range from 300 to 850. The three major bureaus are FICO (TransUnion), Fair Isaac (Experian) Beacon (Equifax), and mortgage lenders need to pull from all three for approval.

Flood Certification Fee – Paid for a flood certification that states whether or not you are in a flood zone as determined by FEMA. The lender is required to track the life of the loan to identify the flood zone status. If a property is later rezoned into a flood area, the lender will contact you and require flood insurance. This fee is required even if your home is nowhere near a flood plain.

BE WARY OF THE FOLLOWING MN CLOSING COSTS

Your Minnesota Mortgage lender has many third party fees to pay and administrative duties to perform in order for your mortgage loan to close. We talked about the appraisal & pulling credit already. There is verification of your income, working with and answering underwriters questions and concerns. Certainly there is time and money associated with this, and your mortgage lender deserves to be compensated for these duties. The end goal is to put together a clean approvable mortgage loan package for a timely mortgage approval and closing. Although your mortgage lender deserves to be paid, you are also able to shop for your mortgage loan. Be wary of multiple fees such as, loan origination, administrative, commitment, processing, etc. The mortgage lender knows what the cost and expenses are to get a mortgage loan processed, approved and funded. They know what third party companies that need to be paid, origination staff, support, administrative, etc. They should list their entire mortgage origination costs under one or two fees. The new Good Faith Estimate (GFE) requires mortgage lenders to do this. However, often the GFE comes after a homemade spreadsheet that made it seem as though the mortgage lender’s fees were smaller. As a consumer you need to know and understand “the total lender fees” and mortgage interest rate to make a good comparison.

Loan Origination, Processing, Underwriting, Administration, in some cases Application, Broker, Commitment Fees, etc. They are often listed separately to confuse and make mortgage lenders fees seem smaller, or that they are being charged by someone other than the mortgage lender. These are often referred to as “JUNK” fees and are all mortgage lender fees!

Wires Transfer Fee – When you purchase the property, your lender may wire funds to an account, known as an escrow account of the title company, to cover the loan amount and the closing costs. The receiving account charges a nominal fee for the wire transfer.

Tax Service Fee – The mortgage lender may require researching and/or examining the records of the Registry of Deeds for the county in which the property lies. Each property is reviewed to confirm that the taxes are paid in full and up to date. Any unpaid property taxes are a liability to the lender. This fee is usually not charged in Minnesota.

900 Items Required by Mortgage Lender to be paid in Advance

Days of Interest – Mortgage lender’s charge interest from the very first day they fund your loan. The lender will require you to pay, at the time of closing, the interest charge from the date the loan is funded until the start of the following month.

Homeowners insurance for 1st year – You pay your homeowner’s insurance for the first year before you get to your closing. Thereafter the monthly amount is collected, escrowed and dispersed by your mortgage lender.

Mortgage Insurance Premium (upfront) Private Mortgage Insurance can be paid for up front or monthly. It is needed on Conventional (Fannie Mae or Freddie Mac) loans without 20% down. ). It is paid by the borrower and insures the lender against certain losses in the event of a foreclosure, and is considered a ‘pre-paid’ cost
1000 Reserves Deposited with Mortgage Lender

Mortgage Insurance premium (monthly) – Private Mortgage Insurance (PMI) may be required on certain mortgage loans, typically those with less than 20% down. It is paid by the borrower and insures the mortgage lender against certain losses in the event of a foreclosure.

Homeowners or Hazard Insurance – In many cases homeowners insurance is escrowed by the lender. If you have 20% equity, you can waive the escrow requirements and pay your taxes and homeowners insurance on your own. At the time of closing, you must pay the entire first year’s premium (this covers storm damage, hail, fire etc.) Thereafter, a monthly amount is collected by your mortgage lender, so the mortgage lender has enough in your escrow account to pay for the next years premium when due.

State/County Property Taxes – Taxes like homeowners insurance are also usually escrowed by your lender. This requirement can be waived if you have 20% equity.

1100 Title Charges

Settlement or Closing Fee – A fee paid to the Title Company for handling all the financial transfers and payments associated with the transaction. The Settlement or Closing Fee is only one of many fees charged by the title company.

Title Insurance – Guarantees that your new home has no other lien claims on the property and guarantees your undisputed ownership. Charged by the title company, but your lender requires that you have lender’s title insurance on the home. Owners title insurance is also available for a small extra charge and is highly recommended.

City/County/Tax/Stamps – Stamps, affixed to the deed, showing the amount of transfer tax paid. Most states stamp the deed rather than affixing a stamp. It is a transfer tax that is collected, in some localities, whenever property changes hands. Minnesota’s state tax is .0023% of the loan amount on ALL loans. (.0024% in Hennepin and Ramsey County)

1200 Government Recording and Transfer Chargers

Recording Fees – To create a public record of your legal ownership of the property, the lenders notify the county government to record the transaction. This fee, which varies by state, is paid to the county.

If there are other terms you might not be familiar with, let us know and we would be happy to assist you in understanding them. We are here to assist you with all your mortgage needs.

Down Payment Assistance Programs Available in Minnesota

Many state, county, and city governments provide financial assistance for people in their communities who are well qualified and ready for homeownership. In fact, in every county within the Twin Cities metro area, there are programs to help first time home buyers realize their home ownership dreams. These mortgage options work out well for potential home buyers, as it means that there are more places they can choose to live, while at the same time getting the assistance they need to make that first home purchase.

Purchasing a home is one of the biggest financial decisions of your lifetime. Getting a mortgage can be a daunting task, finding down payment assistance, improving your credit before you buy or simply navigating the complex process of getting a mortgage and the process of buying your first home. Mark Svihel and Lake Area Mortgage have years of experience helping customers make informed decisions as well as walking them through the steps needed to purchase a new home. The good news is that these programs are not only available to first time homeowners, but also to those that have already owned a home in the past.

Are you in the process of looking to buy a new home? Would you like to know if you qualify for down payment assistance programs?

Rates and Calculators Available in Resources

Visit the “Resources” section of our website to find US Average Mortgage rates and calculators to help you figure out your mortgage payments and payment schedule. If you have any questions or would like more specific information, please use the contact form or call me.

I look forward to answering questions you might have as you look to finance your home.