Where is the money?

Mortgage lenders are not all the same but I don’t imagine most of people who are buying or selling homes have all that much experience with home mortgages. There is a difference. The difference in interest rates and fees from one lender to the next isn’t all that much but the difference in service is huge. There is a reason why I recommend certain lenders. It is because I know that if they send a pre-approval letter they will come provide the funds for the purchase and they will be on time with that money.

A huge part of my job these days is staying on top of the mortgage approval process. There really isn’t a penalty for the loan officer or the lender if the closing is delayed for weeks but delays really mess up the lives of home buyers and sellers.

Before choosing a lender ask around. Real estate agents know which lenders are easy to work with and which ones keep their word. In a multiple offer situations it is easier for me to recommend an offer to a home owner if I have had good experiences with the lender the buyer is planing in using. If I have had bad experiences I let the seller know.


Avoid fake wiring instructions

Don’t take the bait

On March 18 the FTC Consumer Blog issued a post focused on hackers who have been breaking into some consumers’ and real estate professionals’ email accounts to get information about upcoming real estate transactions. After figuring out the closing dates, the hacker sends an email to the buyer, posing as the real estate professional or title company. The bogus email says there has been a last minute change to the wiring instructions, and tells the buyer to wire closing costs to a different account. But it’s the scammer’s account. If the buyer takes the bait, their bank account could be cleared out in a matter of minutes. Often, that’s money the buyer will never see again.

If you are buying a home in Minnesota assume that requests to wire money are bogus if they are coming from real estate agents. Be very suspicious of  wiring requests from anyone asking for closing costs.

We do have a system called “TrustFunds” for electronic earnest money payment but most local real estate agents don’t seem to want to use it. A link is sent to the buyer to TrustFunds so that the earnest money can be paid electronically which is super handy for people who don’t write checks.

As a listing agent I have gotten all sorts of weird emails from people who want access  to my bank accounts so they can send me money to pay for homes I have listed . . ya . . . right.

Mortgage rate over reaction

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Mortgage rates in2005

The Federal reserve raised the benchmark interest rate by .25% yesterday. That doesn’t translate into a .25% increase in mortgage interest rates but even if it did the new rates would only add a small amount to monthly house payments on new mortgages.

Mortgages rates will rise but I think the real estate industry is over reacting. In 2005 rates were more than 2% higher than they are today. More homes were sold that year than will be sold in 2015. Average home prices were higher in 2005 than they are now too. Rents however are higher in 2015 than they were in 2005.

No the sky isn’t falling. It is even possible that the housing market and the economy is recovering from the great recession. There have been times in recent history where both home prices and interest rates were higher than they are today and people bought and sold houses.

The stock market responded positively to the rate increase as did world markets.

I think the way the rules and regulations for borrowing money have tightened up is far more of a threat to first time home buyers.

Closing costs

calculatorFirst time home buyers are often surprised when they find out about closing costs. Those pesky fees are in addition to the down payment. Lenders will provide detailed information about what those costs are but here are a few examples:

1. Loan origination fee

2. Appraisal fee

3. Pre-paid homeowners insurance.

4. Property taxes prorated from the day of closing and for the rest of the year.

5. Mortgage registration tax

Typical closing costs are about 3% of the purchase price which is usually not the same as the loan amount. In addition to closing costs most home buyers will make a down payment. The down payment can be as little as 3%. There isn’t any truth to the rumor that home buyers need to put 10 to 20% down to buy a home. There are some down payment assistance programs too.

Home buyers often ask sellers to pay their closing costs. Typically that means that the buyer borrows 3% more and those funds are applied to closing costs rather than going to the seller. I encourage buyers to do the math and understand that the closing costs come off of the sellers bottom line. I encourage sellers to pay attention to the bottom line and I let them know that paying the buyer’s closing costs is common and often necessary.


Down payment assistance

The friendly folks at down payment resources, also known as DPR, alerted me that they have a new logo. I have had a link to the service on this site for many years. ThPMT_Square_FindHelp_125is week I sent the link to a client and she is able to get up to $6000 in down payment assistance.  The assistance usually isn’t a grant but  low interest or no interest loan that has some strings attached in that they have to be paid back in full if the home is sold in the next few years and often home buyers are required to take a home buyer’s course which is actually helpful in understanding the home buying process.

With most home loan programs a down payment is required. Sometimes as little as 3.5%. When my husband and I bought our first home we took advantage of down payment assistance and paid off the loan when we refinanced several years later.


Contacting a lender

The first step in the home buying process isn’t looking for homes that are for sale. Getting pre-approved by a lender is the first step in the process. Offers on homes for sale need to include some kind of a letter indicating that the potential buyer might qualify for financing.

Like most real estate agents I can not afford to spend a lot of time helping people find a home if they can not buy one. I only get paid after a successful closing of a home sale.

Getting pre-approved also helps buyers determine which price range they want to be in. Sometimes people come to me and tell me they can spend X amount a month on house payments. I am usually able to do the backwards math that I need to do to figure out what price range we need to look in. I have not seen any houses with a listing price of X amount a month.

There is more than just a house payment that needs to be factored in. There are property taxes and homeowner’s insurance and additional costs like heating, cooling, electric, garbage pick-up, and water.


Before meeting with a lender I always suggest coming up with a monthly payment amount that seems comfortable and reasonable. In most cases people are pre-approved for more than they want to spend.

Making payments on anything can be a stressor. Lower monthly expenses can feel liberating and free up more money for opportunities and experiences.